Customs, Excise and Gold Tribunal - Delhi
Concorde Overseas Private Ltd. vs Commr. Of Cus., Icd on 29 May, 2003
Equivalent citations: 2003(89)ECC793, 2003(156)ELT287(TRI-DEL)
ORDER C.N.B. Nair, Member (T)
1. Both Revenue and Licensee are in appeal against the same adjudication Order-in-Original No. SKS/CC/ICD/TKD/49/2001, dated 23-3-2001 passed by the Commissioner of Customs (ICD), Tughlakabad, New Delhi. Revenue's appeal has been filed by the Adjudicating Commissioner himself pursuant to a direction by the Central Board of Excise and Customs.
2. The adjudication proceedings arose on account of failure to meet export obligation in respect of 6 kgs. imported gold. Gold in question was imported by M/s. MMTC Ltd. supplied to the appellant M/s. Concorde Overseas Pvt. Ltd. for conversion into ornaments. On account of the failure to utilize the gold for manufacture into ornament and export the same, the impugned order confiscated the 6 kgs gold absolutely (without option to redeem on payment of fine). The confiscation has been ordered for violation of the provisions of Sections 111(j) and 111(o) of the Customs Act, 1962. In addition, a penalty of Rs. 1,00,000/-was imposed on M/s. Concorde Overseas Pvt. Ltd. under Section 112(a). The Commissioner desisted from imposing penalty on the Directors of the Co., even though the show cause notice had proposed that also.
3. The contention in the present appeal of M/s. Concorde Overseas Pvt. Ltd. is that they were only a supporting manufacturer of M/s. MMTC Ltd. and that the legal obligation to carry out export of ornaments manufactured out of the imported gold rests with M/s. MMTC Ltd. and that for the failure of M/s. MMTC Ltd. to fulfil their export obligation, the appellant could not be visited with any penalty. It is also submitted that there is no failure on their part inasmuch as it is found in the impugned order itself that the appellants had maintained proper records about the gold received by them from M/s. MMTC Ltd. for export production. During the hearing of the case the learned Chartered Accountant for the appellant pointed out that the matter is no more res integra inasmuch as the Tribunal had held in an identical case, in the case of M/s. MMTC Ltd. v. C.C., ICD, Tughlakabad, New Delhi - 2001 (128) E.L.T. 412 (Tri.) that export obligation was of M/s. MMTC Ltd. and therefore, the liability rested on M/s. MMTC Ltd. Learned Chartered Accountant pointed out that the correct legal position had been canvassed before the Commissioner also and Tribunal's order brought to his notice. However, Commissioner proceeded to conclude the adjudication and quite erroneously passed the impugned order. It was also pointed out that the confiscation of gold in question without any notice to M/s. MMTC Ltd. was also illegal.
4. The grievance raised in the appeal of Revenue is that the Commissioner ought to have imposed penalty not only on M/s. Concorde Overseas Pvt. Ltd. but also on its Directors namely, Smt. Kamal Sahni, Shri Ram Gopal Sahni and Shri Sanjay Sahni under Section 112 of the Customs Act, 1962. This submission has been raised purportedly based on the decisions of the Apex Court and the Tribunal. We read the relevant portion of the ground of appeal :
"2. However, the contention of the adjudicating authority for not imposing any penalty on the three Directors does not appear to be in order. When the company as such had contravened the provisions of Customs Act and is liable for penalty and the seized gold is liable for confiscation, there is no justification for not imposing penalty on its Directors. Therefore, the order passed by the Commissioner is neither legal nor correct and proper for the reasons that in various case ratio like T.I. Stephen (AIR 1988 SC 994) and MCD, Delhi - 1983 (1) SCC 9 the Hon'ble Supreme Court held that the company cannot act by itself and it has to act through someone. Hon'ble Tribunal in the case of Joginder Nath Mehra v. Commissioner of Customs, Mumbai -2000 (119) E.L.T. 102 (Tribunal) held that Directors playing predominant role in the scheme of creation of corporate veil. Even in the case of J.N. Mehra, there is no direct implication made by any one apart from, admitting that he was one of the directors though the penalty was reduced from Rs. 20 lakhs to Rs. 5 lakhs but upheld the penalty. The Gauhati High Court in the case of Langharjan Tea Estate v. CBEC - 2000 (123) E.L.T. 55 (Gau.) also held that act of employee, liability of the company. In view of the position explained above, the Board is satisfied that the Order-in-Original passed by the Commissioner is not legally correct and proper and inasmuch as he refrained from imposing any penalty on Smt. Kamal Sahni, Shri Ram Gopal Sahni and Shri Sanjay Sahni all Directors, under Section 112 of the Customs Act, 1962."
5. We find that this Tribunal Order in the case of M/s. MMTC Ltd. - 2001 (128) E.L.T. 412 (T) squarely applies to the present appeal. The issue raised in that appeal was also substantively the same and the Tribunal held as under :
"7. A plain reading of the above notification makes it clear that the benefit of exemption from payment of duty is not available to gold imported by M/s. MMTC Ltd. if conditions of the proviso to para 2 of the notification are not complied with. It is nobody's case that gem and jewellery units fulfilled the requirement of manufacture and export of gold and jewellery articles from the export processing zones. Therefore, duty liability definetely arises. The only argument that is canvassed before us is that the liability cannot be fastened upon M/s. MMTC as it is not the importer but only the supplier of imported gold to gem and jewellery units. We see no merit in this argument. In all the cases before us, it is M/s. MMTC that filed the bill of entry for import of gold. Therefore, M/s. MMTC cannot escape the responsibility cast upon the importers and the fact that the gold was not meant for use by M/s. MMTC itself but was supplied to various units, cannot and does not alter the legal position that M/s. MMTC is the importer of the gold in question. The Scheme under which M/s. MMTC was operating yokes M/s. MMTC with the gem and jewellery units and fulfilment of condition of manufacture and export of jewellery/articles by the said units is necessary in order that M/s. MMTC may avail of the benefit of duty free import of gold. Under the Scheme, dual role has been assigned to M/s. MMTC namely that of importer-cum-supplier. Further, as per the provisions of Rep. Circular No. 22/98, M/s. MMTC has responsibility/continuing obligation to monitor the activities of the exporting units and to ensure export of gold/jewellery within a stipulated period of time following which M/s. MMTC has to inform the Customs authorities and to levy penalty on the unit for extension of period on expiry. M/s. MMTC was charging commission of approximately 0.88% for their services. We also notice that M/s. MMTC supplied gold on loan basis only on the strength of 'issue applications' filed by the respective units and such applications are not the documents prescribed under the Scheme for the purpose of release of fixed quantities of gold to the units. It is also significant to note that the bill of entry cited in the applications is that of M/s. MMTC and the issue applications do not refer to any other bill of entry. The Scheme provides for issue of gold by M/s. MMTC to the units only on the strength of bill of entry filed by the unit and duly assessed. M/s. MMTC had also executed bond with NEPZ Customs under the warehousing provisions of the Customs Act and had undertaken to satisfy the customs authorities that the gold imported by them will be utilised for export as per scheme of export of gold jewellery by units in the EP2 and they were also under an obligation to pay the Customs duty and penalty chargeable on such goods, together with interest."
6. We find no reason to disagree with the above view. In the present appeal also gold was imported, duty free, under export obligation by M/s. MMTC Ltd. and M/s. MMTC Ltd. had executed a Bond with the Customs Authorities for meeting export obligation. Therefore, the liability for non-fulfilment of that export obligation continued to be with MMTC. Appellant had obtained gold in his capacity as supporting manufacturer. It kept its obligation with the Customs Authorities by keeping full accounts about receipt of the gold. It also had not sold or in any other way alienated the gold. In such a situation, imposition of penalty on it was not justified. Therefore, the appeal of M/s. Concorde Overseas Pvt. Ltd. is required to be allowed.
7. The contention of the Revenue is very strange. The entire adjudication proceedings had been concluded without issue of Notice to M/s. MMTC Ltd. who had imported the gold in question and M/s. MMTC Ltd. was bound to carry out the export obligation under a Bond given to the Customs Authorities. All along the 6 kgs. imported gold in question continued to be the property of M/s. MMTC Ltd. The confiscation of the gold without notice to the MMTC is a clear violation of Section 124 of the Customs Act, 1962. That Section specifically forbids confiscation of goods without notice to the owner of the goods. This Tribunal's order in the case of MMTC Ltd. was brought to the notice of the Commissioner during the adjudication proceedings. Yet, he continued that adjudication proceeding without issuing notice to MMTC. Such action was clearly self-defeating; apart from the impropriety involved. Even the Board, while reviewing the impugned order of the Commissioner had not sought to correct this major flow in the order, but has got an appeal filed on a grossly untenable ground that Directors of the Company should also have been penalized. In the impugned order, the Commissioner has clearly reached the finding that M/s. Concorde Overseas Pvt. Ltd. had maintained proper records. At page 6 of the impugned order the Commissioner has noted as under :
"I, however, notice that the company had maintained a proper record of the gold received, used and exported; and impugned 6 kgs. of gold was found intact. I, therefore, hold that for the action under 112(a) ibid, the company deserves a lenient view."
Further, on the question of penalty on the Directors, the Commissioner has recorded the following findings :
"The Show cause Notice also called upon Smt. Kamal Sahni, Shri Ram Gopal Sahni and Shri Sanjay Sahni to show cause as to why penalty should not be imposed on them as being the Directors of the Company. I, however, discover that the department did not engage in any diligence to adduce any evidence or advance any reasons to prove their personal involvement in infringements which rendered the gold liable to confiscation under Section 111 of the Customs Act, 1962, I find that the company has a corporate veil to wear and enjoys the status of a legal person. It, therefore, has a distinct personality, distinct from individual Directors. In such cases, the evidence, for placing a Director within the ambit of penal provisions, should clearly establish that the concerned Director had acted in defiance of law for personal gains. Such evidence has not been produced. I, rather, discover that impugned gold was available; and that evinced that the Directors had not received any personal gains. I, therefore, hold that no evidence is available, which should hold me to infer that penalty is required to be imposed on any or all the Directors named above."
The Commissioner has, thus, found the individual Directors personally not guilty at all in the lapse in regard to failure to meet export obligation. It is idle to canvass obstinately for imposition of penalty on individual Directors in the face of such clear findings in the impugned order in favour of individual Directors. That too, when the appeal does not point out any evidence to fault the finding. It needs no reminding that the power of review under Section 129d(1) is a limited power and it can be invoked only in a case involving illegality or impropriety in the passing of an order or decision. It is not an unbridled avenue to pursue the dispute to the last forum available. Its scope can be much narrower than appeal. The glaring illegality in the adjudication proceeding of the Commissioner was that he proceeded to confiscate gold belonging to MMTC Ltd. without caring to serve a notice on them. Such a proceeding was wholly unsustainable. When this position was pointed out by M/s. Concorde Overseas Pvt. Ltd. in the adjudication proceedings, the Commissioner, instead of feeling grateful that a major infirmity in his proceeding was being brought to his notice and utilizing that opportunity to bring the relevant party into the proceeding, he persisted in the erroneous course with the following observations :
"I find that MMTC is not a party to this show cause notice, and therefore, any attempt to determine and delineate some ambit about the liability of MMTC, in respect of impugned gold, here would be unlawful...."
As is clear from the above observations, that the Commissioner was clearly aware that any attempt to determine liability of MMTC in respect of the impugned gold would be unlawful without notice to them. However, even after noticing the unlawful situation, the Commissioner proceeded to do precisely that illegality i.e. confiscation of gold owned by MMTC Ltd., without notice to them. This glaring illegality should have moved the Board to review the order and to bring the matter before the Tribunal. And not the fact that penalties had not been imposed on individual Directors. We find that reliance placed by the Board on the judgment of Apex Court and Tribunal is wholly incorrect. We find no merit in the appeal of the Revenue.
8. In the result, the Appeal No. C/493/2002-NB(A) of M/s. Concorde Overseas Pvt. Ltd. succeeds and is allowed. Appeal No. C/313/2002-NB(A) of Commissioner of Customs, ICD, Tuglakhabad, New Delhi fails and is rejected.