Customs, Excise and Gold Tribunal - Mumbai
Shah And Mehta And Mukesh K. Shah vs Commissioner Of Customs on 20 December, 2004
Equivalent citations: 2005(101)ECC631, 2005(192)ELT928(TRI-MUMBAI)
ORDER S.S. Sekhon, Member (T)
1. A case of misuse of actual user facility import under open General law was made out and imported goods allowed to be cleared on benefit of exemption notification No. 345/86-Cus on BE, filed by M/s. Shah fiting Co and M/s. Kashmir Enterprises were interdiated on their proceedings initiated on producing in query that the imports were made by their non -existing firms. However, consequent to detailed enquires made and show cause notice issued interactive to the firms and others; the Ld. Commissioner, after considering the material concluded -
i) Out of 17 mt of PVA BP 20 imported, 5 mt, as available and seized should be confiscated under Section 111 (d) & 111(o) of the Central Excise Act, 1962 and be offered a redemption fine of 3 Lakhs.
ii) Ordered the recovery of differential duty on the quantity of 17 mt from the real importer, without naming the real importer.
iii) Penalty of Rs. 8,50,000/- was imposed on M/s. Cashmir Enterprise, Shivpur, Shrinagar, Kashmir under Section 112 (a)(ii) of the Customs Act, 1962 for lending their name to enable clearance of the goods under notification No. 345/86 Cus.
iv) Penalty of Rs. 20 Lakhs under Section 112(a)(ii) or Vijay N. Desai the brain behind the conspiracy for illegal import, illegal claims and illegal sale of the goods and for defrauding the Government Revenue.
v) For acts of aiding and abetting cheating, Defrauding the government of revenue, penalty of Rs. 5 Lakhs each was imposed on Shri. Mukesh Shah, M/s. Shah & Mehta the clearing Agents, under Section 112 (a) of the Customs Act, 1962.
vi) Found no evidence to justify imposition of penalty on Suresh K. Shah, Partner of M/s. Shah & Mehta the clearing agents.
vii) Penalties of Rs. 5 Lakhs was imposed on proprietor of M/s. Vijay Bazar & Co. a Chartered Agents firm under Section 112 (a)(ii) of the Customs Act, 1962.
Only Shri. Mukesh K. Shah & M/s. Shah & Mehta are in appeal before us. Their appeals are being disposed off by this common order.
2. After hearing both sides and considering the material, it is found that
a) The notice proceeds on the assumption of M/s. Cashmir Enterprises being non existent; however from the findings & the order it is apparent that view is given up as penalties have been imposed on them. The existence of the firm and the intent to import cannot be therefore in doubt only the eligibility is now to be questioned. The role of Shri. Vijay Desai and one Nazir as the master minds behind the entire imports and subsequent clearance and alleged diversion have to be considered in the present appellants case, whose roles admittedly are -
i) For M/s. Shah & Mehta, a partnership firm of Licensed Customs House, Clearing Agents, firm, who, as per definition in Customs House Agents Licensing Regulations, 1984, have an agency foundation that cannot subsist after the goods are cleared from Custom Control. The liability, if any is for the acts of omission and commission from the date of preparation & filling of a BE and delivery of goods at Mumbai to the importer other agents of importers. In this case, therefore, if goods have been diverted after clearance the CHA firm, as licensee is not liable. The acts of its partners, if any, in conduct or concert, beyond the partnership business cannot be the acts of partnership firm. The Ld. Commissioner has arrived at a finding that as regards Suresh K. Shah the partner of CHA firm there is no evidence, then how and why the partnership firm should be liable for a penalty? has not been clearly decided. The findings in para 28 of the order impugned as regards the liability of this partnership firm is as follows-
"M/s. Shah & Mehta are the Custom House Agents for clearance of the consignment. Even though Shah & Mehta are the Custom house agent on record, the documentation and clearance work has been attended to by Shri. Mukesh Shah. It has been pleaded that Mukesh Shah is neither an authorized agent, not partner, nor employee of M/s. Shah & Mehta. Therefore, their conduct is not above board. By relying upon Mukesh Shah who had clear knowledge of the entire fraud they were also taking part in the conspiracy of cheating the government of its revenue by getting the goods cleared in an illegal manner. From the very beginning it was in the knowledge of all concerned that the goods are being imported by Vijay N. Desai and not by M/s. Cashmir Enterprises. It was also clear to all concerned that only documents will be produced and in the of Cashmir Enterprises as actual users and the goods would be sold in Bombay as they have been imported for sale by Vijay N. Desai. Inspite of this M/s. Shah & Mehta through their partner Shri. S.K. Mehta executed a bond and provided the CHA surety on the said bond to show that the imports have been made by M/s. Cashmir Enterprises for their bonafide use. They, therefore, succeeded in getting the goods cleared from Customs not only under OGL but under concessional rate of duty under notification 345/86 Cus dated 16.06.86. The plea of the learned advocate that they got the goods cleared in the normal course of their business is not supported by evidence on record because work of clearance was attended to by them with the help of Mukesh Shah who was not authorized to get the goods cleared. They had also executed a bond and provided CHA surety for fraudulent import. The certificate of actual consumption of goods by M/s. Cashmir Enterprises which was recovered from their premises is also to be looked into in this background. The argument by the learned advocate that the certificate was received by them in the normal course of their business from a client and it was not even produced by them to the Customs authorities and they had no knowledge of the fraudulent nature of transaction is not valid because it was known from the very beginning that the goods have not to go to Srinagar and they have to be sold in the Bombay market. Therefore by their actions the CHA were also aiding and abetting the illegal actions namely the clearance of the goods in the name of M/s. Cashmir Enterprise and collecting evidence as if goods were actually used for the authorized purpose so that no investigation could take place in the mater. By their acts CHA M/s. Shah & Mehta have rendered the goods liable for confiscation under Section 111 and themselves liable to penalty under Section 112 of the Customs Act 1962."
It was placed on record by the firm that, and is not denied, that the partnership firm consists of two partners viz. Shri. Suresh K. Shah and Shri. Kamal J. Mehta and the import documents and job for clearance of goods vide BE No. 2090/126 dated 26.06.1990 of M/s. Cashmir Enterprises was entrusted to the firm by one Nazir Shah, who had shown an agreement between proprietor of M/s. Cashmir Enterprises & Rashid Shah and himself, for effecting the clearance of goods through Customs. This is admitted in the statements 1.10.91. It is also on record that no statement of the two partners was recorded by the DRI department or relied by the adjudicator.
ii) Sri. Mukesh Shah is the younger brother of Suresh Shah and is engaged in his own business of freight forwarder from the premises where the CHA firm office is situated. The reliance placed on statements of Shri. Mukesh Shah for having gone to the Custom house to attend to clearance of the BE without a specific or implied delegation form the partners of the CHA firm and nothing else on record is being brought out to indicate that the firm of CHA had abdicated their role in attending to subject BE. In fact the notice accepts the documents of Registration as SSI was submitted to the Customs House Group Asst. Collector along with import Export Code number, the surety bond for end use signed by the CHA, is prior to clearance of the goods. The very fact of recovery of consumption certificates and affidavit dated 14.12.91 of the sole proprietor of M/s. Cashmir Enterprise from the office of the CHA, indicates that the said documents were never presented to the Customs Authorities by the CHA i.e. after the goods are landed and upto the clearance from customs or thereafter. The non questioning of the partners by the investigators i.e DRI and the exoneration of Shri. Suresh K. Shah, the Partner of CHA firm, by the adjudicator from the liability to a penalty under Section 112 (a) or (b) of the Customs Act, 1962 itself would indicate that the penalty on the partnership firm of M/s. Shah & Mehta, under Section 112 (a), for abetting, cheating or defrauding cannot be upheld.
iii) For penalty on partnership firms as arrived at, would call for a culpable mental state and a Partnership firm, in the facts herein or in law cannot be held to be having the same. The individual personality of a partnership firm like that of a Company is not clearly recognized.
Therefore, penalty under Section 112 of the Customs Act, 1962 only on the firm and partners being absorbed cannot be upheld.
iv) Perusal of Section 140 of Customs Act, 1960 reveals that every person who was in charge of the firm at the relevant time and the firm would be liable to a penalty and penalty on the firm would be consequent to determination of a liability on its partners. In the present case, one of the partners was not even issued the show cause notice, and the only other partner has been exonerated from the liability to a penalty, there is no other person in charge or liable in the partnership firm of CHA, The penalty on the partnership firm cannot be therefore upheld.
v) As regards penalty on Mukesh Shah the findings in the impugned order records-
"25. The allegation against Mukesh Shah is that he aided and abetted clearance and sale of the goods in an illegal manner rendering the goods liable for confiscation and himself liable for penalty. In defense of Mukesh Shah learned advocate Pochkanawala argued that he did not do any act prior to clearance of the goods, that he is not an employee or in any way connected and clearing agents M/s. Shah and Mehta; that he does not hold any Customs pass or any entry permit nor is it an allegation with the goods or did any act of clearance through Customs, and he has not signed any documents for clearance. It was also argued that he had arranged for lorries, for transport of the goods, that the goods was actually loaded on to the lorries and that the receipts were given by the transporter in the bonafide manner namely for loading of the goods and subsequently if the goods have been off loaded, he can't be held liable. The allegation that the receipts obtained are bogus and fake is not legally tenable. For misuse of the lorry receipts Mukesh Shah cannot be held responsible. The learned advocate also produced partnership deed of the clearing firm M/s. Shah & Mehta in which Mukesh Shah does not figure as a partner. It may be so that he is neither partner nor an employee of M/s. Shah & Mehta. However, it is also a fact that in his statement recorded by the DRI officers under Section 108 of the Customs Act '62 on 18.06.91 and 27.06.91 he had projected himself to be a partner in the CHA firm of M/s. Shah & Mehta. This statement was never retracted by Mukesh Shah. This statement was written by Mukesh Shah in his own handwriting. It, therefore, cannot be said that this statement was recorded under duress, coercion or threat, etc. also it is important to note that Mukesh Shah has given graphic details of the transactions and sequence of events which indicate that he had detailed knowledge of the import of the consignment, its clearance and its sale etc. from evidence on record it also appears that he had prior knowledge regarding the clearance of the consignment, its sale in the local market and the arrangement for producing fictitious and bogus documents to give the impression that the goods had been sent to Srinagar whereas the goods have been sold in the local market. The submission by the learned advocate the Mukesh Shah had no knowledge that any illegal act had been committed in respect of the impugned goods and that the goods are to be sold in the market, and that lorry receipts are required to be produced only as fictitious evidence is contradicted by evidence on record. I find that Mukesh Shah in his statement dated 27.06.91 recorded under Section 10B of the Customs Act'62 ha sated that Vijay N. Desai had approached him in September, 1990 requesting to clear the consignment of 17m tons of PVA under IGM 2060/126 under concessional rate of duty under Notification 345/86 dated 16.06.86. He inquired about the conditions of the notification and Vijay N. Desai informed him that he had already finalized the deal with an actual user in Kashmir for arranging clearance of the goods at concessional rate of duty. Vijay N. Desai requested him to get the consignment cleared and informed him that certificate for concessional rate of duty under notification 345/86 Cus dated 16.06.86 in the name of a small scale unit will be given to him by one Nazir Shah. Thereafter in October 1990, One Nazir Shah brought him a sealed cover containing SSI certificate No. SSI/K/3795 dated 9.10.90. I observe from the statement dated 27.06.91 of Mukesh Shah that he stated "Shri Nazir Shah told me that the sealed cover contains the original copies of the said letter from Directorate of Industries and Commerce, for the concessional rate of Customs duty, fro the consignment of Polyvinyl Alcohol (PVA) and BP 20 imported by Shri. Vijay N. Desai, in the name of M/s. Cashmir Enterprises, Shivpura, Srinagar, Kashmi -19001". It leaves no doubt that the consignment has been imported by Vijay N. Desai but he is doing so in the name of Cashmir Enterprise to avail the benefits in an illegal manner. I, further, find from the statement of Mukesh Shah that "Shri Nazir Shah further told me that the documents which are given by me are for the import of PVA and that the consignment is arranged and imported by PVA and that this consignment is arranged and imported by Shri. Vijay N. Desai and that this consignment is to be sold here in Bombay only". The statement of Mukesh Shah had been written by him in his own handwriting. The statement is admissible in evidence in these proceedings under the Customs Act '62. his statement leaves no room for doubt that Mukesh Shah clear prior knowledge regarding the entire illegal activity namely that the goods were being imported by Vijay N. Desai, that name Cashmir Enterprises was being used for various concessions and that the consignment was to be sold in Bombay itself. Therefore, the submissions by the learned advocate that Mukesh Shah did not have knowledge that the goods were likely to be sold in Bombay in violation of the condition or that any illegality had been committed in their import or clearance is contrary to the evidence on record. Therefore the citations by the learned advocate of
(i) R.P. Hussain v. Collector of Customs 1990 (49) ELT 452 (Tribunal)
(ii) Justice Pendse's Judgement in the case of Shahikant & Co., and Ors. v. Union of India.
(iii) TOMCO and Anr. v. Union of India 1986 (26) ELT 931 (Bom.) are not relevant in the circumstances of this case because Mukesh Shah was a co-conspirator with Vijay N. Desai and Nazir Shah for illegal import, illegal clearance and illegal sale of the goods in the market for profit. It is also on record that he received Rs. 70,000/- from Vijay N. Desai. This amount can be explained only as his part of the booty and cannot be explained what for an amount of Rs. 70,000/- was received by Mukesh Shah if he merely arranged for transportation of the goods from Bombay to Srinagar.
26. He learned advocate had also argued that the lorry receipts were obtained by Mukesh Shah bonafide and in a legitimate way and the goods were actually loaded on to the lorries and there was no legality committed by Mukesh Shah in arranging for the lorries. It is stating only part of the truth. From the statement of Mukesh Shah it is abundantly clear that he had prior knowledge that the goods are not to be transported to Srinagear and that lorry receipts have to be procured only as an evidence that the goods have actually gone out of Bombay so that no investigations take place further. In this context again I refer to statement of Mukesh Shah where in he stated "in the meant time I am also to stay in anticipation to customs requirements under the said notification Shri. Vijay N. Desai requested me to arrange fro the fake lorry receipts showing consignments as if the goods have been dispatched to Srinagar and to get the fake N-form from octroi department showing as if the consignment has crossed the BMC limits. They have arranged the above mentioned fake lorry receipts and fake N-form through Shri. Parmanand Sharma of the transport company M/s. Richa Road lines. This leaves no room for doubt that Mukesh Shah had full knowledge regarding the illegal nature of transaction that he was to arrange only fake receipts. In fact he merely procured the fake receipts. Therefore the argument advanced by learned advocate at the time of personal hearing that when procured the receipts were not fake and for their subsequent misuse he cannot be held responsible is not acceptable as it is contrary to evidence on record. Also reliance by learned advocate on para 14 (XXVI) at page 11 of the show cause notice wherein Vijay N. Desai had stated that Mukesh Shah had obtained the lorry receipts at the instructions of Nazir Shah does not come to the rescue of Mukesh Shah. Even if he had arranged for the said lorry receipts at the instructions of Nazir Shah he had full knowledge that the goods are not to go to Srinagar and that the consignment is meant for sale in Bombay. Knowing all this he participated in the conspiracy and procured the receipts, thereby taking active part in the conspiracy of defrauding the government of its legitimate revenue.
27. The learned advocate had laos argued that Mukesh Shah is not the clearing agent and he was not in any way connected with the clearance of the goods. This is not supported by the evidence on record. For example Para 26 at page 11 of the show cause notice relied upon by the learned advocate himself itself indicates that Vijay N. Desai had stated that the clearing agent along with Mukesh Shah had arranged for the lorry receipts. Therefore Vijay N. Desai had indicated that Mukesh Shah was connected with the clearing agent. Mukesh Shah himself in his statement had admitted that he was the partner of the clearing agent firm M/s. Shah & Mehta. Even if he is not a partner it makes no difference to this case. The documents for clearance of the consignment were tendered by Mukesh Shah. Mukesh Shah had stated in his statement dated 18.06.91 "I am surrendering a bunch of documents which is maintained in our office - now serial numbered from pages 1 to 13. I have signed the first page (No. 1) and the last Page (Page No. 13) in token of having submitted the same today. This party was introduced to me by one Mr. Vijay N. Desai of Inter Trade Electronics (P) Ltd. Mr. Nazir Shah has given me the import declaration, photocopy of SSI certificate alongwith certificate of Dicrectorate of Industries, stating that goods be cleared under concessional rate of duty. After giving these documents Mr. Nazir Shah told me that I should clear the goods under concessional rate of duty as they are manufacturer of ferrites. On the basis of these documents I prepare the Bill of Entry and filed in the Custom House." Therefore, it is clear that Mukesh Shah took an active part in the clearance of the goods also and the submissions by the learned advocate that he was not concerned with the clearance of the goods is not factually correct. I reiterate that the statement of Mukesh Shah has not been retracted at any time and it being the statement recorded under Section 108 is an admissible piece of evidence. There is indepenedent corroboration of facts in the statements of Vijay N. Desai and Nazir Shah that Mukesh Shah had knowledge regarding the illegal nature of transactions, illegal clearance by showing the consignment was to be sold in the Bombay market and that fake lorry receipts were to be produced even though the consignment was to be sold in the Bombay market and that fake lorry receipts were to be produced even though the consignment was not to move to Srinagar at any time. Example Vijay N. Desia in his statement had stated that M/s. Shah & Mehta, cleared the goods imported in the name of his company namely M/s. Intertrade Electronic Pvt Ltd during 1984 to 1986. That Mr. Nazir Shah told him that he (Shah) would sell the consignment to him for trading and can make goods profit. Mr. Nazir Shah told him (Mr. Desai) that he (Shah) would give the consignment at much lower price than prevailing market price. Mr. Desai had introducing Mr. Mukesh Shah of the CHA firm M/s. Shah & Mehta to Nazir Shah. The consignment was cleared in November 1990. The consignment was delivered at M/s. H.M. Mehta's warehouse at Mazagaon, Bombay - 10 by Shri. Mukesh Shah as per his instruction. Mr. Shah offered him the consignment of PVA BP-20 @ Rs. 110 per kg. He sold the said consignment @ Rs. 120 per kg in the open market and made a profit of Rs. 1,70,000/- Mr. Nazir Shah assured him that he (Shah) will somehow manage to get the consumption certificate showing that the consignment was consumed in the unit at Srinagar. He also gave the duplicate set of documents to Mr. Mukesh Shah through his employees Shri Harish Dharmsy. He also stated that Mr. Mukesh Shah had arranged the lorry receipts at the instruction of Mr. Nazir Shah.
The evidence is therefore incriminating and clinching that Mukesh Shah with full knowledge of illegal nature of the goods, their clearance, and their sale took active part as a co-conspirator for clearance of the goods and made hefty profit by receiving Rs. 70,000/- from Vijay N. Desai. By his actions he rendered the impugned goods liable for confiscation under Section 111(d) and 111(c) of the Customs Act '62 and himself liable to penalty under Section 112(a) (ii) of the Customs Act '62."
Perusal of the above leads us to find that the adjudicator has is found the liability under Section 112 (a) of the Customs Act, 1962. That provision reads as -
"112 Any person -
a) who, in relation to any goods, does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111, or abets the doing or omission of such an act,"
The goods are fo und to be liable to confiscation under Section 111(d) and 111(o) of the Customs Act, 1962. As regards liability under Section 11 (d) & 111(o) on admitted role of Mukesh K. Shah, which as it appears from the notice issued.
"10. In his statement recorded under Section 108 of the Customs Act, 1962 on 18.06.91 Shri. Mukesh Kuverji Shah has stated that :
(i) they had cleared one consignment of Poly Vinyl Alcohol BP-20 vide B/e No. 2090/126 dated 26.06.90 imported by M/s. Cashmir Enterprises, Shivpuri, Srinagar;
(ii) this party was introduced to them by one Mr. Vijay Desai of M/s. Intertrade Electronics (P) Ltd., Champaklai Industrial Estate, Sion, Bombay somtime in September 1990.
(iii) the introduction had taken place in their office and along with Mr. Desai, one Mr. Nazeer Shah was with them.
(iv) Mr. Desai told him that Mr. Nazeer Shah is a friend of him and wanted to clear the consignment of PVA which had already come per vessel S.S. Ever Bridge;
(v) He filed the Bills of Entry on the basis of documents given by Shri. Nazeer Shah;
(vi) They had cleared the consignment within 12 days from the date of filing the B/E;
(vii) As regards delivery of the goods, Mr. Shah had verbally informed him to hand over the goods to the transport company M/s. Richa Road lines, Bombay;
(viii) After clearance they had handed over the goods to the transport company by local trucks;
(ix) They had received the lorry challans dated 9.11.90 and 22.11.90 along with the original octroi 'N' form from Mr. Nazer Shah in their office.
(x) They had received the Customs duty payment by way of demand draft from Mr. Nazeer Shah;
(xi) M/s. Cashmir Enterprises had furnished an end use bond along with bank guarantee through their bankers M/s. Jammu & Kashmir Bank Ltd;
(xii) They had received a letter from M/s. Cashmir Enterprises along with a certificate dated 15.02.91 issued by M/s. Vijay Bazar & Co Chartered Accountants stating that the unit holder had consumed the raw materials in the manufacture of their end products;
11. Shri. Mukesh Shah in his further statement dated 27.06.91 has interalia stated that :
(i) the goods mentioned in B/E No. 2090/26.09.90, Line No. 126 (Imp. Deptt. Sr. No. C10406 dated 25.09.90) were delivered at Gala warehousing Co, Tokaas Road, Near Post office, Sewree, Tel No. 4136933 and 4136800 on the instructions of Shri. Vijay N. Desai of M/s. Inter-trade Electronics (P) Ltd., Sion, Bombay;
(ii) the goods were escorted by Shri. Harish Dharamshi an employee of Shri. Vijay N. Desai.
(iii) He knew Shri. Harish Dharamshi for the last 15 years as his neighbour staying in Block No. 17, Azad Nagar, Wadala.
(iv) He knew Shri. Vijay N. Desai since the year 1984;
(v) He had cleared some 6 to 7 consignments of parts of audio cassettes and tapes in the name of M/s. Intertrade Electronics (P) Ltd., Sion, Bombay in he year 1984/85;
(vi) In September 1990 Shri. Vijay N. Desai came to his office requesting to clear one consignment of EVA BP-20 per vessel s.s. Ever Bridge (IGM No. 2090 dated 26.06.90) under concessional rate of duty under the benefit of notification No. 345/86 dated 16.06.86 under OGL subject to Actual user condition;
(vii) On being asked about the benefit of notification Shri. Vijay N. Desai told him that he had already finalized with some Actual user in Kashmir for arranging certificate for clearing at concessional rate of duty;
(viii) Thereafter one day Shri. Vijay N. Desai had forwarded through his employee Shri. Harish Dharamshi duplicate set of invoice, B/L and certificate of origin and original copies of OGL declaration duly signed on behalf of so-called Actual users in the name and style of M/s. Cashmir Enterprises, Shivpora, Srinagar, J&K.
(ix) Shri. Vijay N. Desai requested him to get the documents noted in the Customs Department and told him that certificate fro concessional rate of duty under notification No. 345/86 issued by Director of Industries & Commerce, J&K Government along with SSI certificate fulfilling the A.U. conditions will be given to him by one Shri.Nazeer Shah;
(x) Thereafter the SSI certificate No. SSI-K/3775 dated 9.10.90 for concessional rate of duty and SSI certificate and one sealed cover addressed to AC, Customs, Bombay was given to them by one person introducing himself as Shri. Nazeer Shah in October 1990;
(xi) Shri. Nazir Shah also told him that these documents were fo the concessional rate of Customs duty for the consignment of PVA BP-20 imported by Shri. Vijay N. Desai in the name of M/s. Cashmir Enterprises, Shivpora, Srinagar, J&K;
(xii) Shri. Nazir Shah further told that this consignment was to be sold in Bombay only and that his duty was to arrange certificate for concessional rate of duty, SSI Certificate for clearing the goods under OGL subject to Actual User conditions and to appear before the Customs Authorities as a person from the actual user firm and to help in the clearance of these consignment and that he was not the owner of the goods under clearance and that Shri. Vijay Desai was the actual owner of these goods;
(xiii) The requirement of P.O. Bond and Bank Guarantee to the extent of 25% of the amount of duty difference in view of the benefit availing under notification No. 345/86 was conveyed to Shri. Vijay N. Desai and Shri. Vijay N. Desai told him that he would pay cash amount required as per bank guarantee to Shri. Nazir Shah and that Shri. Nazir Shah in turn give him the bank guarantee attested by him as well as by the bank and he was asked to get the format of P.O. Bond and bank guarantee typed and he got these documents typed and handed over to Shri. Nazir Shah and thereafter Shri. Nazir Shah gave him the bank guarantee which he had submitted to the Customs Department.
(xiv) Shri. Vijay N. Desai told him that he would be paying the cash amount equivalent to the Customs duty to Shri. Nazir Shah and that Shri. Shah would bring the pay order;
(xv) After depositing the pay order brought by Shri. Nazir Shah to Customs, he informed Shri. Vijay N. Desai;
(xvi) The goods after having been released from the Customs as per the instructions of Shri. Vijay N. Desai were transported under the escort of Shir. Harish Dharamshi to Gala Warehousing Co. Sewree;
(xvii) Shri. Vijay N. Desai requested him to arrange for lorry receipts showing the consignment as if the goods have been dispatched to Srinagar and to get the fake 'N' forms from Octroi Deptt. Showing as if the consignment had crossed the BMC limits;
(xviii) He had arranged the fake lorry receipts and fake 'N' forms through Shir. Parmanand Sharma of M/s. Richa Road Lines, 403-A, Commercial Manor, 4th floor, 68/70, 4th Clive Road, Dana Bazar, Bombay - 9 for a consideration of 30% of the 2% of the amount put together the value and duty of the consignment and he had charged 50% of the 2% of value + duty from Shri. Vijay N. Desai in cash form for this he had paid Rs. 9,000/- in case to Shri. Parmanand Sharma including the amount Rs. 2,000/- (i.e. Rs. 1,000/- for the two fake lorry receipts);
(xix) Shri. Vijay N. Desai paid him Rs. 70,000/- for everything he had done;
(xx) In his statement on 10.06.91 he told lies as Shri. Vijay N. Desai had requested him not to tell the truth to the DRI and that he would manage it through Mr. Nazir Shah;
(xxi) Shri. Nazir Shah also telephoned him requesting him not to tell the truth to the Deptt.
12. Shri. Parmanand S. Sharma, Partner of M/s. Richa Roadlines has sated in his statement recorded under Section 108 of the Customs Act that;
(i) One Mr. Nazir Shah contacted him over phone and informed him whether he could deliver goods (PVA) from Bombay to Srinagar;
(ii) Mr. Nazir Shah suggested that he would send the goods by local transport to his office from where it could be loaded in a lorry and dispatched to Srinagar.
(iii) Mr. Nazir Shah told him that the goods were imported goods and already cleared from the Docks;
(iv) The same day Mr. Nazir Shah send the goods to his office in a local truck;
(v) As he could not arrange for a lorry, the goods were kept in the local truck itself till next morning;
(vi) Next day Mr. Nazir Shah telephoned him and told that the goods were not to be sent to Srinagar and did not have any reason for not sending the goods;
(vii) He had received Rs. 300/- as service charge, through the representative who came to take the goods;
(viii) He had issued 3 copies of lorry receipts, on each to the consignor, consignee and lorry driver and retained one copy as record copy;
(ix) He had asked Mr. Nazir Shah to return the lorry receipt when Mr. Shah had cancelled the order for dispatching the goods;
(x) The goods covered by lorry receipts No. 936 dated 9.11.90 and No. 948 dated 21.11.90 had not been transported by him to Srinagar and had issued these bogus receipts for a commission of Rs. 300/- i.e. Rs. 150/- per lorry receipt.
13. Shri. Parmanand Sharma in his statement recorded under Section 108 of the Customs Act, 1962 on 11.07.91 has interalia stated that:
(i) Mr. Mukesh Shah of M/s. Shah & Mehta contacted him and told that he should prepare two bogus lorry receipts showing the consignee as M/s. Cashmir Enterprise, Shivpora, Srinagar, Kashmir and consignee and M/s. Shah & Mehta, Bombay.
(ii) He told lies on 24.6.91 that Shri. Nazir Shah contacted him for transporting the goods on the instructions of Shri. Mukesh Shah of M/s. Shah & Mehta;
(iii) One day Shri. Mukesh Shah contacted in his office and asked him to see him (Mukesh Shah) in his office immediately of M/s. Shah & Mehta where Mr. Mukesh Shah & Mr. Kamal Mehta were present and that Mr. Mukesh Shah told him not to tell the Deptt. that the goods had not been dispatched to Srinagar and that he should also tell that Mr. Nazeer Shah also contacted for transporting the goods. Shri. Mukesh Shah also told that nowhere his (Mukesh Shah's) name should appear in his (Paramanand Sharma's) statement;
(iv) The lorry receipts dated 9.11.90 and 21.11.90 are bogus which were prepared at the instance of Shri. Mukesh Shah;
(v) He had received Rs. 2,000/- (Rs. 1000/- each) from Mr. Mukesh Shah for the preparation of these bogus receipts;
(vi) On the instructions Shri. Mukesh Shah, he obtained 'N' form from the octroi Dept. to show that the goods had gone beyond the BMC limit and for obtaining the said 'N' form Shri. Mukesh Shah gave him seven thousand rupees;
(vii) The lorry receipts are bogus and no goods had been transported to Srinagar;
(viii) He had issued bogus lorry receipts on the instructions of Shri. Mukesh Shah with the idea that he would be getting more work from M/s. Shah & Mehta.
14. In his statement dated 28.06.91 Shri. Vijay Natwarlal Desai has interalia stated that:
(i) He is having manufacturing unit in the name of M/s. Intertrade Electronics Pvt. Ltd. doing sliting activity of Magnetic tape;
(ii) They were importing raw material (jumbo rolls) of Magnetic tape and the same were cleared by Mr. Mukesh Shah of M/s. Shah & Mehta during the period 1984 to 87;
(iii) He knew one Mr. Nazir Shah of J&K Srinagar for the last 8/9 years through his brother Shri. Prakash N. Desai;
(iv) Shri. Prakash Desai is a LIC agent and Shri. Nazir Shah is also a LIC agent and Travel agent;
(v) He had no other business connection other than the import of Poly Vinyl Alcohol (PVA) BP-20 imported from Taiwan in the name of M/s. Cashmir Enterprises, Shivpura, Srinagar;
(vi) Sometime in the middle of September 90, Shri Nazir Shah came to his office and requested him to help in clearance of one consignment of 17 MT of Poly Vinyl Alcohol imported from Taiwan in the name of M/s. Cashmir Enterprises, Srinagar;
(vii) Shri. Nazir Shah also told him that he (Shah) would sell the consignment to hims (Shri Desai) for trading and thereby can make some goods profit;
(viii) Shri. Nazir Shah also told him that he (Shah) would give the consignment at much lower prices than the prevailing market rate;
(ix) On the basis of the request of Shri. Nazir Shah he had paid an amount of Rs. 5,50,000/- in cash as duty amount towards the clearance of the said document;
(x) He had already introduced Mr. Mukesh Shah of the CHA firm M/s. Shah and Mehta to Shri. Nazir Shah and the consignment was cleared sometimes in November, 1990;
(xi) After clearance, the consignments were delivered at M/s. H.M. Mehta's warehouse at Mazgaon, Bombay -10 by Shri. Mukesh Shah as per his instructions;
(xii) As per the detailed discussions, Shri. Shah offered him the consignment of PVA BP-20 at the rate Rs. 100/- per kg. in open market at the rate of RS. 120/- per kg making a profit of Rs. 1,70,000/-
(xiii) He knew that benefit of exemption notification No. 345/86 for the concessional rate of duty by showing the actual user condition had been availed in the clearance of the consignment;
(xiv) He will be makine payment of Rs. 1,70,000/- which was his profit by way of selling these goods in the open market towards the difference of Customs duty;
(xv) He had trusted Mr. Nazir Shah and financed him for the consignment of 17 mt of PVA covered under IGM No. 2090 dated 26.09.90, Line No. 126, per vessel name s.s. Ever Bridge imported in the name of M/s. Cashmir Enterprises, Srinagar;
(xvi) Instead of using the consignment as raw material for manufacture of Ferrites of Srinagar for fulfilling the actual user conditions, Shri. Nazir Shah had sold the goods to him by taking financial assistance for clearance of consignment towards payment of Customs duty;
(xvii) As far as his knowledge goes Shri. Nazir Shah is a responsible person in M/s. Cashmir Enterpries, because Shri. Shah offered the consignment to him for sale;
(xviii) Shri. Nazir Shah had told him though the firm of M/s. Cashmir Enterprises is in existence, there is no manufacturing activity;
(xix) Shri. Nazir Shah had told him that he (Shri. Shah) will somehow manage to get the consumption on certificate showing the consignment having been consumed in the unit at Srinagar;
(xx) He had paid a total amount of RS. 18,70,000/- for 17 MT of PVA at the rate of Rs. 110/- per Kg in cash to Mr. Nazir Shah in different installments;
(xxi) There is no evidence for this payment in the room of documents;
(xxii) The duplicate set of documents were given to Mr. Mukesh Shah by him (Mr. Desai) through his employee Shri. Harish Dharmsy;
(xxiii) The OGL declaration duly signed were given to him by Shri. Nazir Shah.
(xxiv) It is true that he had invested the amount and given Rs. 6 Lakhs, equivalent to the cost of documents, for retirement and that the certificate for availing concessional rate of duty under notification No. 345/86 and a copy of SSI Certificate were arranged by Shri Nazir Shah.
(xxv) He had sold the material to various parties the names of which he had to check from his record;
(xxvi) Out of the quantity of 17 MT (850 bags), a balance of 5 MT (250 bags) are still lying at Gala of his friend Shri. Dinesh Shah at M/s. Tungarewharr Industrial Estate, Vasal, Distt. Thane.
When asked to state who had arranged for lorry receipt of M/s. Rich Roadlines showing bogus dispatch of the goods to Srinagar, Shri. Vijay Desai has stated that the Clearing Agents Shri. Mukesh Shah had arranged the lorry receipts at the instructions of Mr. Nazir Shah.
These charges, as brought out, in the notice, even if established lead only to arrive at a finding of assistance rendered by Mukesh Shah in obtaining the lorry receipts and 'N' forms. These documents were allegedly to be used to indicate the ostentible dispatch of 17st of PVA outside Mumbai to Srinagar. When in fact part of goods ie. 5 MT were seized outside Mumbai octroi limits at a place, near Vasai, would itself indicate that the goods to have left Mumbai and crossed Octroi Post. There is therefore nothing incriminating in the documents of octroi clearance as alleged. Desai appears to be not questioned about of detailed whereabouts remaining 12 MT of PVA which was as per the department actually sold by him. These goods are not proved to have been sold in Bombay Octroi limit. They could have been also sold outside Bombay. Materials therefore does not indicate that 'N' form obtained was fictitious and evidence that goods never left Mumbai Octroi zone does not exist. The only material that is existing is goods were physically seized outside Bombay Octroi limits proving that goods had left Bombay. Admittedly the lorry receipts issued by M/s. Richa Road lines were issued, the goods were never transported by them. That in itself cannot be evidence of goods not having left Bombay Octroi limits by another means. When no documents indicate a fictional or doubtful receipts and removal from octroi limits of Mumbai (the entire quantity) and or the end use certificates obtained was either or ever used, in any proceedings before the Customs, Officers, mere obtaining of such documents / lorry receipt, without using the same and knowledge about diversion of OGL Actual user goods not being on record, which are the reasons to visit Mukesh K Shah with a penalty for handling and dealing in the impugned goods, cannot be considered to call for penalty. Penalty imposed on this freight from order cannot be upheld especially when it is on records that whatever goods that could be seized by DRI were found to be actually removed out of Mumbai Octroi limits, if they have been directed after removal from Customs & Mumbai. The freight from order cannot be penalized. Failure of the investigation to locate the remaining goods cannot call for penalty on Mukesh on grounds that he obtained lorry receipts and 'N' forms for goods to go out of Bombay, when no such documents were actually used.
b) No satisfactory enquiry was about the goods being diverted and kept with in the octroi limit of Mumbai exist. They cannot be considered as misused. No offence is brought out, as regards the goods seized in this case, since the end use notification does not prescribe the storage of such goods outside Bombay. In any event, Mukesh Shah role, as established, cannot enthuse us to conclude to be causing or resulting in Diversion/misuse of notification or contributing towards the same. Penalty on him for a liability of confiscation under Section 111(o) and 111 (d) cannot be upheld.
3. In view of findings, these two appeals are allowed after setting aside the penalty on them.
(Pronounced in court)