Customs, Excise and Gold Tribunal - Mumbai
R.P. Industries vs Collector Of Customs on 28 September, 1995
Equivalent citations: 1995ECR400(TRI.-MUMBAI), 1996(82)ELT129(TRI-MUMBAI)
ORDER P.K. Desai, Member (J)
1. As all the appeals are directed against the order-in-original No. 126/Collr/89, dated 26-9-1989 of the Collector of Customs (P), Ahmedabad, ordering confiscation vide Section 111(d) and 111(o) of the Customs Act, 1962, of 10 Draw Texturising Machines, with option given to the parties from whom they were seized, to pay fine of the amounts specified in the said order in lieu of confiscation and also imposing personal penalties as specified, on the appellants here, vide Section 112(a) and (b) of the Act, all the appeals are heard together and are being disposed of by this common order.
2. Consequent to seizure of some imported textile machinery from the premises of M/s. R.P. Industries (C/545/89), a Registered SSI unit, a proprietary concern of Mrs. R.P. Mehta where her husband Mr. R.P. Mehta (C/568/89) was working as the Manager, investigations were initiated by the Preventive Collectorate of Customs at Ahmedabad. The same resulted in recovery of 10 Draw Texturising Machines believed to have been imported by way of importing 100% components under the licences issued for import of components, with only assembly made in India, by resorting to what is known as "screw driver technology" at the site of various parties, who had purchased the same. Texturising machines figured at Sr. No. 4(5) (d) Appx-1 Part-A of the Import and Export Policy AM 1985-88, which was the policy applicable to the said import and hence, it was felt that the import of the entire machine could be made only against a Specific Licence, and in any case, the items imported could not have been imported under the licences held by M/s. R.P. Industries, who, under the licences held by them, could have, under their status of Actual Users, imported only the components with process of manufacturing the machines to be undertaken only at their factory; whereas what they had actually done was to import the entire machine in CKD condition. Out of the total 10 machines alleged to have been imported in CKD condition under the licences held by M/s. R.R Industries, and seized under reasonable belief vide Section 110 of the Act, four were sold to and seized from the Western India Texturisers Ltd. (C/7/90), two each to the Warp N'Weft Industries (P) Ltd (C/614/89) and the Indian Pharma Caps and Chemicals Ltd. (C/12/90) and one each to M/s. Panu Trading and Investment Co. (P) Ltd. (C/9/90) and the Shital Trading and Investment Co. Pvt. Ltd. (C/8/90). Further investigations as also the statements of various persons allegedly concerned with the seized machines, revealed that one Mr. Manohar Bhagat (C/11/90) the Managing Director of the Nirlon Synthetic Fibre and Chemicals Ltd. alongwith another Director Mr. Viranchee Sagar (C/10/90) had in collusion with one Mr. R.K. Jain of Sonia International (C/632/89) conspired to get the complete machines imported through M/s. R.P. Industries and Mr. Bhagat had also arranged for transfer of money from M/s. Nirlon Synthetic Fibre and Chemicals (C/3/90) to the Needle Eye Investment and Finance Ltd. (C/24/90) which amount was used in financing the subject import. Mr. R.K. Jain had also arranged a loan from IDBI.
3. Prima facie satisfying that there was contravention of policy provisions and the goods imported were liable to confiscation under Sections 111(d) and 111(o) of the Act, and persons concerned liable to imposition of penalty under Section 112(a) and (b) of the Act, Show Cause Notices dated 27-3-1988 was served on the appellants and some others by the Collector (P) Ahmedabad, which was contested by all the noticees firstly on the ground (raised by all of them) that the said Authority was not competent to issue such a notice and adjudicate upon the same, as the subject import was effected in Bombay, and M/s. R.P. Industries and Mr. R.P. Mehta further contended that they had imported only raw material/component and consumables and other spares for the machinery which were sold to various parties who had done the job of assembly and erection. Mr. R.K. Jain denied his involvement and further contended that it was not open to club the imports of various components made on various different dates and then allege import of complete machine in CKD condition. Mr. Bhagat and Mr. Virenchee Sagar pleaded that they had given only the guidance and advice to the parties concerned, on some policy provisions and the Nirlon Synthetics stated that they were interested in purchase of same machinery and had therefore, made some advance payment to the Needle Eye Investments who in turn contended that they had simply granted loan to M/s. R.P. Industries on recommendation of Mr. Bhagat. Both of them pleaded to have taken no part in causing the import. The other appellants claimed to have purchased the machines in regular course of business.
4. Adjudication proceedings were conducted and the impunged order was passed.
5. Heard the Id. Advocates for the appellants and the Id. S.D.R.
6. All the appellants have challenged the jurisdiction of the Collector (P), Ahmedabad to issue the show cause notice and adjudicate upon, on the ground that the subject goods have been imported and cleared from the Customs at Bombay and it could be only the Collector of Customs at Bombay who is competent to initiate the proceedings and adjudicate upon the validity of the said import. Reference is made to the decision from the Tribunal in Singh Radio and Electronics v. Collector - 1988 (36) E.L.T. 713 (Tribunal) and Metro Exports v. Collector - 1988 (14) ECR 169 (CEGAT) and the judgment of Karnataka High Court in Devilog Systems India v. Collector -1995 (76) E.L.T. 520 (Kar.) challenging the approach of the Adjudicating Authority and his reference to the Govt. Notification M.E (D.R.) No. 87/84-Cus., dated 23-3-1984 it is contended that under the said notification, Collector (Preventive) Gujarat is appointed only is Collector (Preventive) Bombay and could, thus, exercise only the preventive jurisdiction, and vide M.E (D.R.) Notification No. 251/83-Cus., dated 27-8-1983, it is only the Collector of Customs, and not the Collector of Customs (Preventive) who is competent to adjudicate in relation to the imports caused at Bombay.
7. Vide Notification No. 87/84-Cus., dated 22-3-1984 the Collector of Customs (P) Gujarat is also appointed as Collector of Customs (P) Bombay, and vide M.F. (D.R.) Notification No. 250/83, dated 27-8-1983 the Collector of Customs (P), Bombay is also appointed as Collector of Customs, Bombay Notification No. 251/83, dated 27-8-1983 confers jurisdiction in Collector of Customs, Bombay amongst others, over Port of Bombay and Bombay Airport. Conjunctive reading of all the three notifications, all issued in exercise of the powers invested in the Government, vide Section 4 of the Customs Act, 1962 clearly shows that Collector (Preventive) Gujarat enjoins all the powers of Collector of Customs (P), Bombay who is also invested with the powers of Collector of Customs, Bombay. The powers of Collector of Customs, Bombay to adjudicate upon the subject import are not under challenge, and obviously therefore, the Collector of Customs (P), Gujarat at Ahmedabad is the authority competent to investigate issue show cause notice, and adjudicate upon the subject import. None of the citations given by the appellants have dealt with the situation as it exists here; and hence cannot have any bearing on the issue raised.
8. On the merits of the allegations as to unauthorised import of complete machines, Mr. Willingdon Christian, the Id. Advocate for M/s. R.P. Industries has submitted that the documentary evidence alongwith certain undisputed factual position alone are sufficient to negative allegations. He has pleaded that the appellants have held valid licences for import of components, and that the invoices for the items imported bear the specific names and descriptions of each such item and that the invoices were duly attached to five Bills of Entry filed, and the clearances have been given by the Bombay Customs without any objection as to misdeclaration or as to unauthorised import of complete machines. He has submitted that M/s. R.P. Industries have also purchased some of the components for these machines from the local market and the transport documents show receipts of items at their factory. Referring to the invoices from Lunia Exports (P) Ltd. and SMG Associates (P) Ltd. as also the transport Receipts from the Transporters, he has submitted that these documents have been seized from their office, at the time of initial search and have been referred to even in the show cause notice, which rules out the probability of their subsequent fabrication. The Id. Advocate has then referred to the judgment from the Supreme Court in Dynamatic Hydralics Ltd. v. Collector, 1992 (37) ECC 10 (SC) and of the Calcutta High Court in HCL Ltd. v. Union of India, 1992 (40) ECC 257 (Cal.) to plead, that the Customs Authority have to merely examine whether the items imported are as per licence, and could not go beyond that and allege that import is of complete machine. Distinguishing the Supreme Court judgment in Sharp Business Machines v. Collector 1990 (49) E.L.T 640 (SC) relied upon by the authority below, it is pleaded that the licence in the said case permitted import of only 62% of the components and import of 100% components was beyond the scope of the licence. In his submission irrespective of the same, here some positive evidence is adduced to show the purchase of some of the components from the local market. He has also submitted that there could be no violation of the policy provisions, merely because, some of the assembly work have been carried out at the site of their respective customers.
9. Mr. Puri, the Id. S.D.R. has however submitted that during the policy period 1986-88, only raw material and components could be imported by the actual users (Industrial) whereas, appellants have imported complete machines declaring them as components. In his submission, clearance from the customs at Bombay, by practising fraud, could not operate as a bar in subsequent investigation, and has pleaded that Bills of Entry produced were misleading. He has referred to the statement of Mr. M.M. Manglic, the Import and Export Manager where he has stated that complete machines in CKD conditions were imported. He has also pleaded that Mr. Mehta and Mr. Jain had examined machines in use and the evidence shows that the same machines have been imported. It is also submitted that the import is against sight payment and no Letter of Credit is opened and that there are clear admissions as to import of complete machines, in the statements of Mr. R.P. Mehta. He has further pleaded that in any case, there is a clear admission that the goods have gone directly to the purchasers without any process carried out at the factory of M/s. R.P. Industries, and the actual user condition is not satisfied.
10. Mr. Willingdon, in reply, has submitted that the statement of Mr. R.P. Mehta has stood virtually retracted by the subsequent stand taken, and in case, the unimpeachable documentary evidence clearly disprove the allegations made.
11. Considering the submissions made, and going through the documents made available, M/s. R.P. Industries have been granted Import licence No. P/S/1894102, dated 6-12-1984 to import raw material components/consumables for manufacture of their end product Draw Texturising Machinery. Five Bills of Entries alongwith the respective invoices produced show that under each of them, certain items, duly identified by their specific names, many of them in 10 numbers, have been imported. That these items are the components for Draw Texturising machines is not doubted. No evidence is led by the department to show that these items by themselves, could on assembly, bring into existence ten complete Draw Texturising Machines. Textile Machinery Experts does not appear to have been consulted for his expert opinion. On the other hand, R.P. Industries have produced two invoices dated 10-2-1986 and 12-2-1986, of Lunia Exports (P) Ltd. and one invoice dated 24-10-1985, from SMG Associates (P) Ltd. to show local purchases of some items which also go for manufacture of Draw Texturising Machines. All these local purchases of components are either after or during the period, when subject items were being imported. The transport receipts issued by M/s. Suresh Transport Co., for transport of material purchased from Lumia Export (P) Ltd. to M/s. R.R Industries at Daman Industrial Estate near Vapi are also produced. Significantly all these documents are recovered from the office of M/s. R.P. Industries, when search was carried out and they form part of the documents referred to in the show cause notice. Subsequent fabrication of these documents therefore cannot be suspected. The investigation does not seem to have been extended upto those suppliers so as to delink them from the subject import or from the seized machines. The documentary evidence, thus provides a positive indication to probabilise the stand taken by the appellants. Though this positively goes contrary to what has been stated by Mr. R.P. Mehta, and Mr. M.M. Manglic but when a glaring evidence in the form of documents, the genuineness of which is difficult to be doubted, as they appear to have been existing since before the investigations commenced and investigations do not appear to have been directed towards further verification, such documentary evidence has to be preferred for acceptance as against some oral version given before the officers investigating. The statements have been recorded vide Section 108 of the Customs Act, 1962 and such statements would under ordinary circumstance, deserve credibility for the purpose of drawing a conclusion. Here however they are inconsistent with the documentary evidence, leading to raise a doubt as to their admissibility and in any case, with the factual position as brought out on record, the allegation of the appellant M/s. R.P. Industries having imported complete machines in the form of components, cannot be held as duly established and order of confiscation of the machines under Section 111(d) of the Act does not appear justified. That part of the order-in-original is therefore, held as not sustainable and is set aside.
12. In view of the finding of fact as above the issue of applicability of the ratio of various judicial pronouncements eited does not require to be examined. Suffice it to mention that if that was called for, then the judgment from the Supreme Court, in Re : Dynamic Hydraulics Ltd. could have stood attracted.
13. The other objection on the subject import is that the importers have contravened the condition of import, as though, import is made in their capacity of Actual User (Industrial), they have straightaway transferred the entire machinery to their customers. With the basic allegation of their having imported complete machines in CKD condition held as not proved, the very basis of their having supplied the machines without undertaking any process at their factory would not survive. Besides that, there is evidence in the nature of Invoices from the local suppliers and Transport Company to show that the components for the machines have gone to the factory of M/s. R.P. Industries at Daman. Though the oral version as given by Mr. R.P. Mehta as also Mr. M.M. Manglic provide some room for grey area, the documents show the contrary. The machines are of the size, where removal in completely assembled condition may not be plausible, and hence, merely because, they are removed in CKD or SKD condition to the site where they have been installed, by itself, could not lead to drawal of a conclusion of non-compliance with the import condition. The situation as it exists here, thus, clearly entitles the importers to get the benefit of doubt and the order of confiscation of machines vide Section 111(o) of the Act requires to be set aside. That part of the Order-in-Original is therefore set aside.
14. When the main allegations as to unauthorised importation is not sustainable, the role allegedly played by the other individuals cannot tantamount to attracting the provisions of Section 112 of the Act. Going by the series of the statements recorded and different versions given, same grounds may be available to suspect something unusual or coloured in the entire episode. The role played by Mr. R.K. Jain, as disclosed in the statement of R.P. Mehta as also the admissions of Mr. R.P. Mehta, as to his involvement, appears rather strange. However, the Tribunal has to adjudicate upon given set of documentary devidence, and to examine whether there is any violation of the Policy provisions, and whether, from the ITC angle, there is any contravention and here, notwithstanding any other things, the documents are clear enough to show that there has been no irregularity and that being the case, there is no option but to hold that penalty imposed on various parties is also not sustainable, The same are also set aside.
15. In the result, all the appeals are allowed and the entire order of the Adjudicating Authority is set aside. Consequential relief, if any, to follow.
R. Jayaraman, Member (T) 15.1 I am in agreement with the conclusions recorded by my Id. brother Shri Desai that all the appeals are to be allowed. While doing so, I would like to emphasise on the following factors, which are significantly noticed.
15.2 The entire case is built up only on the statements of the individuals concerned, overlooking certain glaring evidences seized at the time of search. These evidences go to indicate local purchase of some parts for texturising machines. Strangely no investigations appear to have been conducted to support the version recorded in the statements, that the entire machines have been imported in C.K.D. condition. They were also not questioned on these local purchases. This leaves a wide gap in the allegation made by the Dept. that the entire machines have been imported and removed to the site from the port of import for installation. Besides, configuration of the parts imported to make a complete machine by mere assembly is not established by any engineering Expert's evidence. This is another serious deficiency noticed in this case for the Deptt. In these circumstances the allegation rests only on the statements, which go contrary to the evidences noticed even at the time of seizure, no which investigations have been done.
15.3 Even in adjudication proceedings, when the other theory of defence based on tangible evidences seized, also looks probable, benefit of doubt is to be given. Hence I agree with my Id. brother and allow the appeals.