Madras High Court
P.Bhaskar Naidu vs The Customs on 22 March, 2018
Bench: S.Manikumar, T.Ravindran
IN THE HIGH COURT OF JUDICATURE AT MADRAS
RESERVED ON : 06.03.2018
PRONOUNCED ON : 22.03.2018
CORAM
THE HONOURABLE MR. JUSTICE S.MANIKUMAR
AND
THE HONOURABLE MR. JUSTICE T.RAVINDRAN
C.M.A. No.1315 of 2012
P.Bhaskar Naidu,
Chief Executive Officer,
Archana Exports.
14-346 Palace Road,
Kuppam 517425. ... Appellant
Vs.
1. The Customs, Excise and Service
Tax Appellate Tribunal,
South Zonal Bench,
Shastri Bhawan Annexe, 1st Floor,
26, Haddows Road,
Chennai 600 006.
2. The Commissioner of Customs (Exports),
Custom House,
No. 60, Rajaji Salai,
Chennnai 600 001. ... Respondents
Prayer: Civil Miscellaneous Appeal filed under section 130 of the Customs Act, 1962, against Final Order No.141/2012 dated 16.02.2012 on the file of the Hon'ble Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Chennai.
For Appellant : Mr. S.Murugappan
For Respondents : Mr. A.P.Srinivas
*****
JUDGMENT
(Judgement of this Court was made by T.RAVINDRAN, J.) Challenge in this civil miscellaneous appeal is made to the Final Order No. 141/2012, dated 16.02.2012, passed by the Customs, Excise & Service Tax Appellate Tribunal, South Zonal Bench, Chennai, rejecting the appeal preferred by the appellant, challenging the Order in Original No.6636/07, dated 31.08.07, passed by the Commissioner of Customs (Export-seaport), Chennai and imposing the penalty on the appellant to Rupees six lakhs for the acts committed by him, (for his role in the attempted export of Red Sander Wood Logs), as provided under Section 114 of the Customs Act, 1962.
2. Shorn of unnecessary details, the case involved in the subject matter is that the appellant, as the Chief Executive Officer of M/s.Archana Exports, filed a Shipping Bill for export of 20 MT of Granite Cobble Stones to Malaysia and accordingly, the abovesaid goods were stuffed into container at the exporter's factory at Kuppam on 03.08.2005 under the supervision of the Central Excise Inspector, Range I, Chittor, who had affixed his seal to the loaded container and allowed the same to be taken to Chennai port. The shipping bill had also been filed on the same date in the office of the Commissioner of Customs (Exports) Chennai. The Central Excise Inspector issued a certificate of verifying the empty container, checking the packages for the correctness of the contents and thereafter, loading of the packages into the container and sealing it with his seal. It is found that the Docks Intelligence Unit gathered intelligence that red sander wood logs, a prohibited item under the Foreign Trade Policy (2004-2009) were smuggled out of India by way of mis-declaration through Chennai port to Malaysia, Singapore and Hong Kong and based on the above intelligence gathered, the officers concerned identified a container TEXU 2338038(20') covered by Shipping Bill No.2124658 dated 03.08.2005, filed by one M/s. Archana Exports, for which, the appellant is the Chief Executive Officer. On suspicion that the abovesaid container might contain contraband in the place of declared cargo of Granite Cobble Stones at M/s. CCTL, Chennai port on 06.08.2005 and on visual examination of the container, in the presence of witnesses, it was noticed that the rivets of the handles on the right side door of the container appeared to be tampered with and changed with new ones. However, the Central Excise Seal bearing No.CE HYD 64 and the Steamer Agents OTL bearing No.011547 (SOL) were verified and found to be intact and thereafter, the authorities concerned broke up the seal and found the container to contain wood logs instead of the declared Granite Cobble Stones and thereafter, after complying with the necessary formalities in the presence of the witnesses, the container in question was opened and on opening, wood logs of assorted sizes were found stacked inside the whole container and they were certified as Red Sander Wood logs by the authorities concerned and they were noted to be totally in 377 in numbers and accordingly, noting that the wood logs totally weighing 13320kgs were attempted to be exported out of India in contravention of the provisions of Customs Act, 1962, the above said contraband namely, the red sander wood logs were seized under a mahazar and thereafter, the appellant as well as the others involved in the matter were examined and their statements were recorded under Section 108 of the Customs Act.
3. The appellant, on being examined on 08.08.2005, had inter alia informed during the course of his voluntary statement that pursuant to the order placed by a Malaysian party i.e., M/s. Naldex Sdn. Bhd, Malaysia, for the export of granite cobble stones through one Mr.Krishnan of Chennai, who had met him at Kuppam, on behalf of Mr.Selvam of M/s. Naldex Sdn Bhd, Malaysia, during the month of May 2005, and placed order for 20 tons of cubes for a sum of US $ 1600/- and arranged payment of US $900/- through bank remittance from Malaysia as advance and also paid a further sum of Rs.30,000/- towards the material and the other alied works, who had asked him to keep the material ready for export and further, according to the appellant, meanwhile, one P.Saravanan contacted through phone and said that he was the brother of the buyer of Malaysia and informed that only the trailers owned by him should be used for moving the consignment from Kuppam to Chennai harbour and finally, after contacting the container agent and the CHA for necessary release of the container box and the documentations respectively, informed further that a trailer bearing Registration No.TN28E9696 with an empty container bearing the number TEXU 2338038 (20') came to his factory at Kuppam and the granite cobble stones were stuffed into it under the supervision of the Central Excise Inspector and after the affixing of the seal, the trailer left and he handed over the certified copies of the requisite papers and the sealed cover containing the seal to the person who came along with the trailer for handing over to the Chennai customs and according to him, that the shipping bills concerned for the abovesaid export has been generated in his firm's name i.e., Archana Exports, and later informed by the customs authorities that on the interception of the container, it was found to contain red sander wood logs instead of the declared cargo as described in the shipping bill and further, according to him, the trailer did not reach the harbour within a reasonable time and when he questioned Saravanan, with reference to the same, he informed that the vehicle was stopped by RTO on the ground that it was loaded beyond the prescribed weight at some point of place and that Saravanan informed him requesting to instruct the CHA to get the customs formalities done faster and thus, according to the appellant, the red sander wood logs would have been stuffed after destuffing the cargo during the transport time from Kuppam to Chennai, on the instruction of Saravanan or Krishnan and that the address of Saravanan has been furnished to him and according to him, Krishnan had not given any contact address and further, according to the appellant, when he was examined on 14.09.2005 that he is in-charge of the company M/s. Archana Exports and that he was approached by one Krishnan representing one Mr.Selvam of Malaysian buyer and Selvam had also contacted him over phone and informed that his brother would contact him in Chennai as regards the proposed export and later, Saravanan contacted him and furnished his address and that he never met him in person and contacted only through phone and he is not aware of the transport agency and the details of the driver of the said truck fixed for the transport of the consignment from Kuppam to Chennai harbour.
4. The authorities concerned, after examining the other persons involved in the matter and recording their voluntary statements as provided under law and further noting that the fax number and the address of Saravanan as furnished by the appellant did reveal that they did not pertain to Saravanan and relate to others and accordingly, concluded that red sander wood logs numbering 377 pieces totally weighing 13320 kgs and valued at Rs.23,31,000/- (LMV) and Rs.53,28,000/- (IMV) were attempted to be exported out of India by mis-declaring as 20 Mts of granite cobble stone vide shipping bill number 2124658, dated 03.08.2005, in the name of M/s. Archana Exports by replacing the contents enroute from Kuppam to Chennai by Selvam, Saravanan, Krishnan with the active connivance of the driver of the trailer and accordingly, initiated proceedings against the appellant and the others and issued the show cause notices and in the show cause notice issued inter alia it was mentioned that Selvam, Saravanan, Krishnan were involved in the attempted illegal export of prohibited goods i.e., red sander wood logs out of the country as detailed above, therefore, they are liable for penalty under section 114 of the Customs Act, 1962 and the appellant i.e., the exporter, Chief Executive Officer of M/s. Archana Exporters in whose company's name illegal export was attempted to be done is also liable to penalty under section 114 of the Customs Act, 1962 and thereby called upon the appellant and others involved in the matter to show cause to the Commissioner of the Customs, Export (Seaport), Chennai, within 30 days from the date of receipt of notice.
5. The commissioner of customs (Exports) Custom house, accordingly on the basis of the explanation offered, passed the Order in Original No.6636/07, dated 31.08.07, by arriving at his findings involving the complicity of the appellant in the attempt of the export of the red sander wood logs by mis-declaration which are liable to be confiscated as per the section 113(i) of the Customs Act 1962, by recording his findings as against the appellant in the following manner.
18. I have carefully gone through the records, the written submissions and the personal hearing proceedings. It is seen from records of the case that Shri.Bhaskar Naidu, the Chief Executive Officer of M/s.Archana Exports obtained the order to supply Granite Cobble Stones to M/s. Naldex Sdn.Bhd., Malaysia through one Mr.Krishnan. Accordingly he arranged for the exports. However, it is strange to note that Shri.Bhaskar Naidu does not know the address of the person who acted as middleman for overseas buyer. Mr.Bhaskar Naidu could not even furnish the address of Shri.Krishnan to the department. It is reasonable to expect that any prudent business man let alone the exporter would check the veracity of buyer to ensure that he receives payment for the supplies made. According to Shri.P.Saravanan, who owned the trailers informed Shri.Bhaskar Naidu that he was the brother of the overseas buyer. However whereas he failed to give the correct address of Shri.P.Saravanan too and instead provided some fictitious non-existing address and phone numbers to the department, as and when Shri.Bhaskar Naidu needed to contact Shri.Saravanan he was able to reach Shri.Saravanan. For instance, on 03.08.2005, Shri.Bhaskar Naidu contacted Shir.P.Saravanan to enquire whether the container, which left his premises, had reached Chennai Harbour. Again on 05.08.2005 Shri.Saravanan contacted Shri. Bhaskar Naidu asking to expedite the clearance. The Fax message dated 08.07.2005 of Shri.Selvam received at 7.20 P.M seized at Archana Exports, Kuppam reads I am out of the country for a few more days. This gives a clear message that Shri.Selvam and Shri.Bhaskar Naidu had on going regular business deals. The exchage of e-mail messages betwee Shri.Selvam and Shri.Bhaskar Naidu clearly indicates their earlier transaction, and business dealings even before the present consignment. This clearly establishes that Shri.Bhaskar Naidu. CEO of M/s.Archana Exports and the overseas buyer knew each other very well. Both carefully hatched a fraud creating a web of intermediaries to smuggle prohibited Red sanders under the garb of Granite cobble stones. He himself being the main conspirator tried to mislead the Department by way of engaging a number of intermediaries and by furnishing the wrong and fictitious Telephone Numbers and Addresses, so that investigation are lost in the trail.
19. The container supplier M/s.Jedan Lines M/s.D.Thimmeswara Rao, Custom House Agent connived with Shri.Bhaskar Naidu in arranging and supplying the container used for smuggling of the Red Sander. The records show that the container seized with Red Sander Wood Logs had reached the premises of M/s.Archana Exports at 1 P.M. On 03.08.2005 and left Kuppam at 7.30 PM on the same day. By his own admission Shri.Robert Samson General Manager of Jedan Lines returned from Kuppam by Brindavan Express to Chennai on the same day. A check of the Railway Time Table Show that this train departs Kuppam at 4.10 P.M. Therefore, by his own admission Shri.R.Robert Samson, General Manager of M.s,Jedan Lines was in Kuppam on the very same day the container was being loaded with Red Sander Wood Logs. It cannot be a mere co-incidence that he handed over the paper to Shri.Saravanan's representative on 02.08.2005 at 3 PM and next day proceeded to the spot where the container was loaded with prohibited goods.
20. The mobile numbers of Shri.Slevam, Shri.Saravanan and Shri.Krishnan and other details such as the addresses were furnished by Shri.Bhaskar Naidu. Efforts made by the department to trace the three persons did not yield results. It is clearly established that Shri.Bhaskar Naidu masterminded the operation and put the same into operation in connivance with these persons.
Accordingly, inter alia, imposed penalty of Rs.10 lakhs on the appellant for his role in the attempt of export of the red sander wood logs under section 114(i) of the Customs Act 1962.
6. Impugning the same, the appellant has preferred the appeal before the Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, Chennai, namely, first respondent herein and the tribunal, by its Final Order No.141/2012 dated 16.02.2012, confirmed the findings of the The Commissioner of Customs (Exports) i.e. the second respondent herein and held that the appellant is liable to penal action under Section 114 of the Customs Act 1962 for the contraventions committed as above detailed, however, reduced the penalty from Rupees ten lakhs to six lakhs and in other aspects, rejected the appeal preferred by the appellant. Impugning the same, the present civil miscellaneous appeal has been preferred.
7. The civil miscellaneous appeal preferred by the appellant has been admitted on the following substantial questions of law:
1. Whether the appellant can be visited with penalty under section 114 of the Customs Act, 1962, on the stated cause (in the show cause notice) that the illegal export was attempted in the name of M/s. Archana Exports of which the appellant was the CEO?
2. When investigation did not result in finding any involvement of the appellant and consequently the show cause notice itself was limited to an averment that the illegal export was attempted in the name of M/s. Archana Exports of which the appellant was the CEO, was it open to the respondents to invent new grounds when passing order in adjudication and appeal?
8. It is mainly contended by the counsel appearing for the appellant that in the show cause notice, no overt act as such has been attributed against the appellant for the de-stuffing of the granite cobble stones in the container and re-stuffing of red sander wood logs in the container, during the transit from Kuppam factory to Chennai and as the appellant is not shown to be directly involved in the abovesaid operation and as the declared cargo were properly stuffed into the container at the factory, in the presence of the central excise officer and who has also issued a certificate as regards the same and the container and the packages were duly sealed, it is his argument that the replacement of the declared cargo with the red sander woods log would have taken place enroute and perpetrated by the others, who are named to be involved in the attempt of the illegal export of the prohibited goods i.e., Selvam, Saravanan, Krishnan and in such view of the matter, according to him, merely because the shipping bill of the export had been issued in the name of the appellant company, that by itself would not fasten any liability on the appellant and therefore, according to him, he is not liable for any imposition of penalty under Section 114 of the Customs Act, 1962 and it is his contention that both the respondents had erred in holding that the appellant is liable for penalty as per the above provisions of law and therefore, seeks for the reversal of the same and the entertainment of the appeal preferred by the appellant.
9. However, it is contended by the standing counsel appearing for the customs department that based on the statements given by the appellant, it is found that he had interacted with reference to the export transaction with third parties, without a proper verification of their identity and the appellant had not also ensured to ascertain the veracity of the buyer at Malaysia, the middle men who had acted for the alleged buyer and also found to be in connivance with the middle men for arranging their trailer to transport the consignment from the factory to Chennai harbour and the appellant, even thereafter, unable to furnish the correct details of the middle men who had interacted with him, with reference to the concerned export and on the other hand, when it is found that the address and the fax number furnished by the appellant as regards the middlemen were found to be not true and relates to some other persons and accordingly, the appellant being found to be a person who had entered into the transaction without due verification, which would be normally expected of from a prudent person, it is contended that the appellant accordingly failed to take appropriate and adequate steps to safeguard the said transit of the declared cargo from the factory to Chennai harbour, it is contended that thereby the appellant has made himself responsible for the penal action as per the relevant provisions of the Customs Act, 1962 and in such view of the matter, it is argued that the order passed by the respondents do not warrant any interference and therefore, according to him, the civil miscellaneous appeal preferred by the appellant is liable to be rejected.
10. After considering the rival contentions putforth by the respective counsel, it is noted that as per Section 114 of the Customs Act, 1962, that any person who, in relation to any goods, does not or omits to do any act which act or omission would render such goods liable to confiscation under section 113, or abets the doing or omission of such an act, shall be liable to a penalty as detailed therein. It is found that the intelligence had been gathered by the authorities concerned that by mis-declaration, the prohibited goods are being attempted to be exported through Chennai to Malayasia and accordingly, the authorities concerned, on the interception of the container involved in the matter, found that they contained the prohibited goods i.e., red sander woods logs instead of the declared goods and thereby, it is found that the Section 113(i) of the Customs Act, 1962 come into operation and in such view of the matter, it is found that the appellant, being the chief executive officer of the company, who had arranged the export and enroute, the prohibited goods are found to be loaded in the place of the declared cargo and attempted to be exported abroad by way of mis-declaration and when it is further noted that the appellant is unable to give the correct particulars of the middle men, who had approached and interacted within as regards the export in question, it is seen that as rightly determined by the authorities concerned, the appellant cannot be declared to be an innocent person, particularly when it is noted that he had acted with the middle men without verifying their credentials etc., more particularly, the credentials of the buyer concerned and when it is noted that the appellant is unable to furnish any correct information as regards the various middle men who had approached and intermediated with him as regards the subject concerned, it is clearly found that the appellant is also in collusion and complicity and acted hand in glove with the middle men for arranging the smuggling of the prohibited goods to Malaysia by mis-declaration. When it is noted by the authorities concerned that the container involved and arranged by the middlemen, on examination, the rivets of the handles on the right side door of the container appeared to be tampered with and changed with new ones and though the seal was found to be intact, it is found that the middle men, who had operated with the appellant in the export concerned, in connivance with the appellant, had during the transit, destuffed the declared cargo and re-stuffed, with the prohibited goods, so as to ensure that the prohibited goods are taken abroad without proper scrutiny. In such view of the matter, the appellant being the exporter should have taken all the safeguards in relation to the goods through whom the same are being exported and if he does any act or omits to do any act which would render such act or omission resulting in the goods liable to confiscated as provided under section113 and even abets the doing or omission of such acts, would be liable to penalty as per Section 114 of the Customs Act, 1962. Under the above provisions of law, it is seen that as rightly determined by the authorities concerned, the question of mens rea is not at all relevant for being liable to confiscation and penalty and in such view of the matter, considering the voluntary statements given by the appellant to the authorities concerned, which are admissible in evidence as per law, when it is found that the appellant had suspicious and clandestine dealings with the middle men vis-a-vis, the subject export and even during the interrogation unable to furnish any correct particulars as regards the middle men, who had interacted with him with reference to the subject export and on the other hand, the so called information furnished by him, being found to be not genuine, it is seen that the appellant, right from the inception, is instrumental in arranging for the restuffing of the prohibited goods in the place of the declared goods and in such view of the matter, the appellant cannot plead ignorance that inasmuch as the persons noted in the show cause notice, enroute, had changed the goods concerned, he could not be fastened with any liability. As rightly putforth by the standing counsel appearing for the customs department, the appellant being the chief executive officer of the export company should take all the precautionary steps to ensure that the goods are transmitted from the factory to Chennai harbour safely and when the appellant is found to have allowed the middlemen to intermeddle with the cargo and later, not furnished any correct information as regards the middle men who had intermeddled with the goods and when it is seen that the appellant is found to have received some amount in cash, though some remittance had been made in bank from Malaysia, however, on an analysis of the materials placed on record coupled with the provisions of law, as above stated, it is found that the appellant has wittingly made himself liable for the penal action under the provisions of the Customs Act, 1962, for failing to ensure the proper and safe transit of the goods to the destination, which resulted in the intermeddling of the goods by the third parties and accordingly, the appellant having rendered himself liable for the seizure of the confiscated materials during the search, as rightly determined by the second respondent as well as the first respondent tribunal, it is found that the appellant is liable to penal action under Section 114 of the Customs Act, 1962.
11. In this connection, the standing counsel for the customs department placed reliance upon the decisions reported in (2017) 4 MLJ 257(Sanco Trans Ltd. vs.The Customs, Excise and Service Tax Appellate Tribunal, South Zonal Bench, No.26, Shastri Bhavan Annexe Building, Haddows Road, Chennai 600 006 and another) as well as the decision reported in 2017 (346) E.L.T. 547 (Mad.) (K.V.Shivaraj Vs. CESTAT, Chennai) for the contention that there is no need for the attribution of any mens rea on the part of the offender as regards the act or omission done by him in relation to the goods liable for confiscation as provided under Section 113 of the Act or abets the doing or omission of such acts and as rightly putforth, a perusal of the above said decisions, would go to show that the facts and circumstances of the case above discussed, Section 114 would stand automatically attracted in the event of any act done by way of omission and commission, as stipulated therein.
12. On the other hand, the counsel for the appellant placed reliance upon the decision of this Court rendered in C.M.A. No.1783 of 2017 dated 26.07.2017 (Commissioner of Customs Vs. M/s. Mansa Impex Services). The principles of law outlined in the above said decision are taken into consideration and followed as applicable to the case at hand. He also placed reliance upon the decision of the CESTAT, South Zonal Bench, Chennai reported in 2010 (262) E.L.T.385 (Tri. - Chennai) (Sekar & Sekar Processs Vs. Commissioner of Customs, Chennai). However, as seen, the said decision had been rendered on the facts and circumstances of the case and therefore, would not be applicable to the case at hand.
13. Adding further, when this Court questioned the standing counsel for the Customs department as to whether any criminal prosecution has been launched against the appellant, for the above said acts, it was informed to us that the appellant and others were prosecuted and the appellant being the main accused, for the offences committed by them as regards the subject matter, in E.O.C.C.No.23/2008, on the file of the Additional Chief Metropolitan Magistrate (E.O.I.), Egmore and it is informed by him that the appellant has been convicted in the said case for the violations committed by him. However, it is represented by the appellant's counsel that as against the conviction and the sentence imposed on the appellant, an appeal has been preferred and the same is pending in the High Court. Be that as it may, when it is found that a criminal Court has also found the appellant to have committed serious infractions of the Customs Act 1962 in arranging the export of the prohibited goods by mis-declaration, though we do not mainly rely upon the judgment of the criminal Court for the present adjudication, the same is also taken note of by us regards the further actions initiated against the appellant with reference to the subject transaction.
14. On an overall assessment of the materials placed on record and after considering the rival contentions submitted by the respective parties, we do not find any reason to interfere with the findings of the respondents 1 and 2, that the appellant is liable to penal action under section 114 of the Customs Act 1962. For the reasons aforestated, accordingly we also concur with the penalty imposed on the appellant by the CESTAT Chennai. The substantial questions of law formulated in the civil miscellaneous appeal are accordingly answered against the appellant.
15. Resultantly, the civil miscellaneous appeal is dismissed with costs. Consequently, connected miscellaneous petition, if any, is closed.
(S.M.K.,J) (T.R.N.,J)
22.03.2018
Index : Yes/No
Internet:Yes/No
sli
To
1. The Customs, Excise and Service
Tax Appellate Tribunal,
South Zonal Bench,
Shastri Bhawan Annexe, 1st Floor,
26, Haddows Road,
Chennai 600 006.
2. The Commissioner of Customs (Exports),
Custom House,
No. 60, Rajaji Salai,
Chennnai 600 001.
S.MANIKUMAR, J.
&
T.RAVINDRAN,J.
sli
Pre-delivery Judgment in
C.M.A. No.1315 of 2012
22.03.2018