Customs, Excise and Gold Tribunal - Mumbai
Joitkumar B. Jain vs Commissioner Of Customs (P) on 3 December, 2004
ORDER Moheb Ali M., Member (T)
1. This appeal has been filed by Shri Joitkumar B. Jain (the appellant) against an order passed in adjudication by the Commissioner of Customs (P), Mumbai, dated 26.2.2004 and its corrigendum dated 22.3.2004 (the impugned order). In this order, the Commissioner ordered confiscation of 2940 pieces of Nokia mobile phones valued at Rs. 1,42,30,000/- and 54000 pieces of watch movements of foreign origin but gave the appellant an option to redeem the same Under Section 125 of the Customs Act, 1962 on payment of redemption fine of Rs. 50,00,000/- on 2940 pieces of Nokia mobile phones and Rs. 10,00,000/- on 54000 pieces of watch movements. The Commissioner also imposed a penalty of Rs. 15,00,000/- on the appellant Under Section 112(a) and 112(b) of the Customs Act, 1962.
2. Briefly the facts are that on specific information that Nokia brand mobile phones, and watch movements of foreign origin were smuggled into the country by one Shri Joitkumar Jain and stored in his premises at Room No. 9, 1st floor, Rassiwala Chawl, R.S. Nimkar Marg, Mumbai 400 008, the said premises was searched by the officers on 17.9.2003. The search resulted in the recovery of 2940 pieces of Nokia brand mobile phones and 54000 pieces of watch movements totally valued at Rs. 1.58 crores approx. On being asked, the owner of the said premises, Shri Joitkumar Jain could not produce any stock register or customs duty paying documents in respect of these goods. Hence, the said goods were seized under panchnama dated 17.9.2003 under a reasonable belief that they are smuggled and were handed over to the appellant under supratnama for safe custody. The appellant produced photocopies of invoice of M/s. Rishabh Industries, Mumbai. for watch movements and two incomplete bills of entry having only one page each in respect of import of Nokia mobile phones by one M/s. Time Land Trading Co., Vasai. Later on, the appellant was reluctant to hand over the seized goods to the department, the officers with the help of police under panchnama dated 19.9.2003 deposited the seized goods in the departmental godown at Lower Parel, Mumbai.
3. During the investigations, statements of various persons including the appellant were recorded and premises searched. Based on investigations, a show cause notice dated 2.1.2004 was issued. Requiring the appellant to show cause as to why the seized goods be not confiscated and why penalty should not be imposed on him Under Section 111 (d) and Section 112(a) and 112(b) of the Customs Act, 1962 respectively. The appellant denied the allegations made in the show cause notice. The Commissioner adjudicated the case and passed the impugned order.
I. In regard to Nokia mobile phones, the appellant submitted:
(a) The phones in question were purchased from M/s. Time Land Trading Co. under invoice No. MOB/LOC/001 dated 16.9.2003. Out of the total purchase of 4200 pieces, the seller delivered 2940 pieces to the appellant on the same date.
(b) As the mobile phones are not notified Under Section 123 of the Customs Act 1962, the burden lies on the department to prove that the said phones are smuggled in nature.
(c) The impugned goods cannot be held to have been brought into the country illicitly and unlawfully particularly when the buyer and the seller have confirmed the transaction and receipt of contention.
(d) M/s. TLTC wrote several letters to the department and showed readiness to co-operate with the department Therefore, Sanjay Singh, proprietor of M/s. TLTC authorising Shri Hundia cannot be held to be of any adverse consequence.
(e) M/s. TLTC is not noticee and therefore were not required to explain the stock.
(f) It was natural to stop delivery of balance quantity after the seizure of 2940 pieces.
(g) The following factors are not relevant to the issue according to the appellant :-
(i) appellant placed oral order;
(ii) appellant has made a statement that the appellant was general manager of M/s. TLTC;
(iii) octroi was paid on 7.10.2003;
(iv) MRP stickers were not found on boxes at the time of seizure;
(v) Payment to the sellers was not made immediately;
(vi) Sanjay Singh was not available for investigation;
(vii) There is no explanation about the disposal of the balance stock of the said phones by M/s. TLTC.
(h) Bill of entry shows goods are of Korean origin. The goods however have no indication of such origin. It does not mean that they are not of Korean origin and not covered by the bills of entry.
(i) Respondent erred in over-emphasising the statement of the appellant that he was general manager of M/s. TLTC.
(j) Liability to pay octroi is on the seller. On learning that the octroi has not been paid, the appellant has opted to pay the octroi himself.
(k) The statement of the CHA does not belie or contradict the claim by the appellant. It was but natural that the stickers got removed during examination. Moreover CHA retracted his statement.
(l) Every mobile phone has a serial number and therefore the onus is on the department to verify the same from the manufacturers and since the department failed to do so, the finding that the goods are not of Korean origin is unsustainable.
(m) The respondent erred in holding that the impugned goods were not purchased from M/s. TLTC, particularly when M/s. TLTC have confirmed the sale.
(n) The goods are therefore not liable to confiscation and no redemption fine can be imposed.
II. In regard to watch movements, the appellant submitted:
(a) The watch movements were purchased from M/s. Rishabh Industries vide bill No. 015 dated 15.9.2003 for which payment was made. M/s. Rishabh Industries confirmed the sale and stated that they purchased the watch movements from Popat Rambia of M/s. Shiv Shakti Consumer Co-op. Society.
(b) Statement of Popat Rambia of M/s. Shiv Shakti Consumers Coop. Society cannot be relied upon since he did not appear for cross-examination.
(c) Respondent failed to appreciate that the model number FYOUxJ claimed to have been sold by Shri Popat Rambia to M/s. Rishabh Industries is not true or correct since there is no corroborating evidence for this.
(d) Markings and the mobile numbers mentioned on the envelopes while making the inventory on 3.11.2003 is not the model numbers mentioned on the watch movements and therefore panchnama dated 3.11.2003 is bogus.
(e) Cross-examination of panchas supports that no proper method of sampling was followed and therefore change/switching of samples cannot be ruled out.
(f) If procedure of seizure is illegal, the seizure itself becomes illegal and consequently the confiscation also becomes illegal.
(g) M/s. Rishabh Industries have confirmed the sale and the bill produced by the appellant was genuine, thus as per the judgment in S.K. Chains v. CC 2001 (127) ELT 415, the burden Under Section 123 is discharged by the appellant.
(h) Respondent failed to appreciate that the premises of M/s. Rishabh Industries in Mumbai are owned by the wife of the appellant or that M/s. Rishabh Industries have borrowed money from the appellant. It does not mean that the watch movements are smuggled and that the bill is a cover up.
(i) Thus the watch movements are fully explained and they are not liable to confiscation and no redemption fine can be imposed.
III. In regard to penalty, the appellant submitted:
(a) Since goods are not liable to confiscation Under Section 111(d), no penalty Under Section 112 can be imposed.
(b) Order in original shows pre-determined, prejudiced or biased mind and is based on assumptions, presumptions, inferences, conjectures and surmises.
(c) Section 112(a) & (b) are mutually exclusive and therefore no penalty under both the clauses can be imposed simultaneously.
(d) As there is no allegation of illicit importation by the appellant, no penalty Under Section 112(a) can therefore be imposed.
(e) There is nothing on record to show that the appellant dealt with the goods with the knowledge or reason to believe that they are liable to confiscation, therefore no penalty can be imposed Under Section 112(b) also.
4. In support of his contention that the appellant discharged the burden cast on him in regard to acquisition of watch movements Under Section 123 and that the department has not discharged its burden in regard to mobile phones, reliance is placed by the appellant on the following decisions:
(i) S.K. Chains v. CC(P), Mumbai 2001 (127) ELT 415 (T-Mum.)
(ii) Pukhraj Nihalchand Jain v. CC, Mumbai 2003 (154) ELT 715 (T-Mum.)
(iii) CC(P), WB v. National Radio Products 2003 (156) ELT 131 (T-Kolkata)
(iv) Laxmi Narayan Somani v. CC, Patna 2003 (156) ELT 131 (T-Kolkata)
(v) Vikram Jain v. CC, Bangalore 2003 (158) ELT 205
(vi) Takshila Spinners v. CC, Chandigarh 2001 (131) ELT 568 (T-Del.)
(vii) Vallabh Alloys Ltd. v. CCE, New Delhi 2003 (157) ELT 398 (T-Del.)
5. In regard to the watch movements, the main contentions of the appellants are that panchnama was not drawn properly; that Popat Rambia, the proprietor of M/s. Shiv Shakti Consumer Co-op. Society, has not been produced for cross examination and that the Commissioner erred in discarding the evidence produced by the appellant to show that the watch movements were procured from M/s. Rishabh Industries. We observe that during the course of personal hearing, the sealed packages in which the samples were drawn from the consignment of watch movements were opened in the presence of the officers who drew the panchnama. The officer deposed before the adjudicating officer that the batch numbers mentioned on the covers were the ones shown on the cartons in which the watch movements were found. He admitted that he had not seen the part numbers etc. inscribed on the watch movements themselves as he did not have the magnifying glass with him during the course of search and seizure. He also deposed that the numbers written on the covers containing the samples tallied with the numbers on the cartons. The appellant's contention that because incorrect part numbers were written in the panchnama the whole proceedings got vitiated cannot be accepted. It is a fact that the watch movements were seized from the premises of the appellant. There is, therefore, a recovery. Any lacunae in the panchnama do not vitiate the seizure itself. The panchnama is drawn in the presence of the appellant and a copy of which was given to him. It is well settled that illegality of search does not effect the validitv of the seizure of goods. Nor it vitiates the recovery of the articles or the subsequent trial (ACCE v. Wilfred Sebastian and Ors. 1983 (12) ELT 122 [Ker.]). If the person from whose possession the goods were seized does not object to the manner in which the panchnama is drawn in his presence, he cannot later turn round to say that the seizure is illegal.
6. Insofar as non-production of Popat Rambia, proprietor of M/s. SSCC Society, we observe that the Commissioner made two attempts to summon him to be available for cross examination. The witness, however, has written a letter to the Commissioner, saying that the appellant was threatening him (letter dated 3.11 .2003). When the appellant was asked as to where he procured the watch movements from, he stated that he did so from M/s. Rishabh Industries. The officers questioned the latter to find out as to where he got the watch movements from. He deposed that he purchased them from M/s. SSCC Society. The latter, however, denied having sold the same parts which were seized. It has come on record that M/s. Rishabh Industries purchased the watch movements from M/s. SSCC Society somewhere in December 2002. Watch movements are notified to be perishable items Under Section 110 of the Customs Act, 1962 by the Government of India vide MF(DR) notification 3186-Cus dated 5.2.1986 as amended. Popat Rambia also says that what he has sold in December 2002 are perishable watch movements. M/s. Rishabh Industries seem to have sold the same movements in September 2003, i.e. nearly after nine months. The Commissioner has rejected the theory that the watch movements under seizure were the ones purchased from M/s. SSCC Society. We observe that the total turnover of M/s. Rishabh Industries, according to their own statement, is around Rs. 90 lakhs a year. One has to stretch one's imagination to believe that M/s. Rishabh Industries purchased perishable items worth lakhs of rupees in December 2002 and kept them for sale only in September 2003. When a person from whose possession the goods are seized docs not give a plausible explanation as to where he procured the goods of foreign origin, the department can conclude that the theory put up by the person is false. In regard to the contention that Popat Rambia was not produced for cross-examination, we observe that in the circumstances stated above, the Commissioner has relied on his statement even when Popat did not respond to summons. In the case of K. Balan v. UOI 1982 (10) ELT 386 (Mad), the High Court of Madras held that right to cross-examine is not necessarily a part of reasonable opportunity. It largely depends on the adjudicating officer who is not guided by the rules of evidence as such.
7. The Hon'ble Supreme Court in the case of AC v. Sitaram (AIR 1966 8955) held that Indian Evidence Act applies only to all judicial proceedings and that it has no application to quasi judicial or departmental proceedings. The same view was expressed in the case of UOI v. K. T. Verma (AIR 1957 SC 882). Again in the case of Employees of Firestone Tyre v. Workmen (AIR 1968 SC 230) and Central Bank of India v. Prakash Chand (AIR 1969 SC 983), the apex court held that in a domestic enquiry, technical rules of evidence do not apply. In the light of these decisions, one has to see how fatal it is to the case when a person whose statement is relied upon is not produced for cross examination. A departmental officer can only summon a witness but cannot ensure his presence unless he goes to the route of prosecuting him for non-attendance. The Commissioner made every attempt to ensure the presence of Popat Ranibia. There are important aspects in the statement of Popat Rambia which can be relied upon even otherwise. The fact that he has sold some watch movements in December 2002 is admitted by all concerned. The Commissioner was right in holding that the watch movements sold by M/s. Rishabh Industries in September 2003 are not the ones sold by Popat Rambia. We uphold this contention.
8. Watch movements are notified Under Section 123 whereby the burden of proof that they are not smuggled lies on the person from whose possession they are seized. The burden cast on the person is to prove that they are not smuggled. Such burden cannot be discharged by making a claim that he has purchased it from someone. The appellant has failed to discharge the burden Under Section 123. The goods are, therefore, rightly confiscated Under Section 111 (d) of the Customs Act.
9. It is the contention of the appellant that the burden of proof is on the department to prove that the mobile phones, which are not notified Under Section 123, are smuggled and that the department has not discharged the burden cast on it. We observe that (here are several decisions of the tribunal that in respect of non-notified goods the department has to prove that they are smuggled. The Hon'ble Supreme Court in the case of CC Madras v. D. Bhoormal (1983 (13 ELT 1546)) laid down the extent to which the department has to discharge this burden. We observe that in the case cited supra the apex court was dealing with both notified as well as non-notified goods. According to the apex court, the department is required to establish such a degree of probability that a prudent man may on its basis believe in the existence of the facts in issue to discharge its burden. The court held that the department need not adduce direct evidence of illicit importation. The court further held that if a full opportunity is given to the accused to establish that the goods are acquired in the normal course of business and that there was no violation of the rules of natural justice it cannot be said (hat the department was throwing the burden of proving on the accused what the department has to establish. The court observed that the department was simply giving an opportunity to the accused to rebut the first and the foremost presumption that arises out of the telltale circumstances in which the goods were found.
10. In AIR 1972 S.C. 2136 (Kanungo and Company v. CC Calcutta) it was contended before the Supreme Court that the burden on the Customs authorities had not been discharged and that there was no evidence that the goods in question had not been brought into India lawfully. It was further urged that the burden was wrongly placed on the appellant. Repelling these contentions the apex court held in the case cited supra that although the burden is on the Customs authorities, they had discharged that burden by-falsifying in material particulars the story put forward by the appellant. The court further held that a false denial could be relied upon by Customs authorities for the purpose of coming to the conclusion that the goods had been illegally imported. In our opinion, theses principles applied by the Supreme Court in the above cases have not been set aside by any subsequent decisions of the apex court. Thus, these principles hold the field in spite of many decisions to the contrary by lower judicial forums. We also observe that an officer investigating into an offence under the Customs Act can legitimately ask the person with whom foreign marked goods are found as to where he acquired the goods from. By doing so he is only pursuing an investigation. In none of the cases cited by the appellant except in the case of Vikram Jain (2003 [158] ELT 205) any reference is made to the law as laid down in the case cited supra. Even in Vikram Jain's case, the Tribunal quoted the prefatory remarks and not to the findings of the Supreme Court in I), Bhoormal's case. We now proceed to examine the appellant's case in the light of the findings of the Supreme Court in D. Bhoormal & Amba Lai's case cited supra.
11. In the present case the appellant was asked as to where he got the Nokia mobile telephones from. Me has staled that he has purchased them from M/s TLTC who in turn imported them and cleared them from the Mumbai Air Cargo Complex on 16th September, 2003. Investigation revealed that these phones were sent out of Mumbai to Vashi on the second shift of 16th September. When confronted with this fact, the appellant states that these very phones were brought back from Vashi by him through some hamaals in a train sometime on 17th itself. This version is given to explain as to why no octroi was paid when the phones were brought back to Mumbai. The appellant was also asked as to why the stickers that were pasted on the mobile phones cleared at Air Cargo Complex were not found on the phones seized from the appellant. It is brought out on record by the clearing agent who handled this cargo that the mobile phones cleared at the Air Cargo Complex had the stickers on them and were also of Korean origin. The appellant's reply to this is that the stickers got removed when he was checking the phones he had purchased. The Commissioner holds that it is not possible that stickers nearly on all phones could have fallen off just like that. This is one of the factors the Commissioner has taken into consideration while rejecting the appellant's contention that the phones seized from him were a part of the consignment cleared at Air Cargo Complex. The appellants also raised a contention that the department was wrong in holding that the phones seized were not of Korean origin. They contended that no mobile telephone has any inscription indicating the country of manufacture. We observe that once the department disputes this aspect, it is for the appellant to establish that the seized goods were of Korean origin. The appellant appears to be saying that the department should have verified whether the phones are of Korean origin from the serial numbers inscribed on the phones. Once a reasonable presumption is raised against the person from whose possession the goods are seized, the burden shifts to that person. The department is able to falsify the version presented by the appellant. As per the ratio laid own in Kanungo's case cited supra the department can come to a conclusion that the goods are smuggled into the country. The Commissioner also relied on the fact that the appellant was working as a general manager in M/s. TLTC till the other day and so could not have purchased such a huge quantity of telephones from his previous employer. He also laid stress on the fact that the seller (M/s. TLTC) has made himself scarce during the investigation. We find that the department has sufficiently falsified the explanation of the appellant that the goods seized from him were legally imported into the country. Insofar as the department is concerned, it is not required to establish its case with mathematical precision. The present import policy does not restrict the import of mobile phones but that does not mean that such phones arc not smuggled into the country to avoid customs duties.
12. The Commissioner held that the appellant is liable to penalty Under Section 112 of the Customs Act, 1962 (para 59). In this regard, the learned advocate argued that penalty has been imposed Under Section 112(a) and Section 112(b) of the Customs Act, 1962. Section 112(a) and 112(b) are mutually exclusive and therefore penalty under both the clauses cannot be imposed simultaneously. As stated above, findings of the Commissioner regarding penalty are in para 59 of the impugned order, which is reproduced below:-
"Regarding the penalty, I find that 2940 pieces of Nokia brand Mobile Phones and 54000 pieces of watch movements of foreign origin were recovered and seized from the premises situated at Room No. 9, 1st floor, Rassiwala Chawl, R.S. Nimkar Marg. Mumbai-08. These premises are owned by Shri Joitkumar Jain. I further find that for claiming the watch movements under seizure, he has produced invoice No. 15 of M/s. Rishabh Industries for the purchase of watch movements from them. I also find that office premises of M/s. Rishabh Industries are situated in a premises which is owned by wife of Shri Joitkumar Jain and the factory premises at Goa of M/s. Rishabh Industries are owned by Shri Joitkumar Jain, the noticee. It is also seen that major funding for running of M/s. Rishabh Industries is by the noticee himself and this fact has not been denied by him at any stage of the proceedings. Since he was in a position to dictate the terms, he could manage to produce the invoice of M/s. Rishabh Industries for claiming the bonafide purchaser of the seized watch movements. However, I find even this could not help him out in any way as the model No. of watch movements covered by the said invoice differed from the one on the seized goods. It is like a saying that "an offender always leaves a mark after doing an act howsoever careful one may be". I further find that the noticee has claimed that the Nokia brand mobile phones under seizure were purchased by him from M/s. TLTC who had imported the same. This could also be got managed by him just due to the very fact that he was engaged as General Manager in the said firm and has full control over the said firm. However, he could not succeed in his claim due to the reason that import consignment covered by the Bills of Entry of M/s. TLTC were of Korean origin, whereas mobile phones under seizure do not find any mention of Country of origin. Further, consignment imported by M/s. TLTC was delivered to the Finn's premises at Vasai after claiming exemption of octroi as deposed by the CHA and their employees and as found from 'N' form. All these attempts made by Shri Joitkumar Jain prove his full and wilful involvement in dealing with these smuggled goods which have been held liable to confiscation. He has been found keeping and purchasing such goods which he had reasons to believe were liable to confiscation Under Section 111 of the Customs Act, 1962. (Emphasis added). His these omissions and commissions and dealing with such goods have rendered the same liable to confiscation. As such, Shri Joitkumar Jain is liable to penalty Under Section 112(a) and 112(b) of the Customs Act, 1962."
13. From the above, it is evident that the Commissioner was intending to impose penalty Under Section 112(b) of the Customs Act. The mention of Section 112(a) in the order appears to be unintentional and is of no consequence. Merely a mention of Section 112(a) in addition to Section 112(b) in the order is not fatal to the imposition of penalty Under Section 112(b) when the allegation and finding point out that Section 112(b) is invoked. Imposition of penalty of Rs. 15 lakhs in a case where the value of the smuggled goods is Rs. 1.58 crores is not excessive. We, therefore, uphold the penalty Under Section 112(b) of the Customs Act, 1962.
14. The appeal is rejected.