Customs, Excise and Gold Tribunal - Calcutta
M/S. Kunal International And Shri Shiv ... vs Cc, West Bengal, Calcutta on 21 June, 2001
Equivalent citations: 2001(77)ECC701, 2001(138)ELT132(TRI-KOLKATA)
ORDER
Lajja Ram
1. These are two appeals filed by (i) M/s. Kunal International and ii) Shri Shiv Kumar Jain purported proprietor of M/s. Kunal International, being aggrieved with the common Order-in-Original No. 107/98/Commissioner dated 21.09.98 passed by the Commissioner of Customs, Calcutta. they were heard together and are being disposed of by this common order.
2. The matter relates to the import of Mulberry/Tussah Silk Yarn on the strength of alleged fraudulently obtained advance licence under the Duty Exemption Entitlement Certificates (DEEC) Scheme. The manipulations and forgery of the documents in obtaining advance licence were detailed in the show cause notice dated 9.9.98. Subsequently, the advance licence against which duty free clearance of the goods imported had been sought under Notification No. 30/97 Cus dated 1.4.97 (as amended), was cancelled by the licensing authorities ab initio vide order dated 17.09.98. Thereafter a prayer was made by the importers that the imported goods may be allowed clearance to them on payment of customs duty and on fine as no licence was available at the point of clearance for the clearance of the goods out of customs charge. The Commissioner of Customs, who adjudicated the matter, ordered under his order-in-Original dated 21.09.98 for confiscation of the goods. The CIF value of the goods so imported unauthorisedly was about Rs. 1.36 crore and were covered by nine bills of entry. A redemption fine of Rs. 15,00,000/- was imposed. Appropriate customs duty was ordered to be payable on redemption of the goods. A penalty of Rs. 5,00,000/- was imposed on Shri Shiv Kumar Jain.
3. The matter was heard on 24.4.2001 at Kolkata when Shri Aftab Ahmand, Advocate appeared for both the appellants. He pleaded that at the time of import the licences were valid and there was no justification for imposition of such a high redemption fine and penalty. He relied upon the Supreme Court's decision in the case of Union of India & Anr. Vs. Sampat Raj Dugar & Anr. - 1992 (39) ECR 189 (SC). There reference was also made to the Tribunal's decision in the case of Sri Shyam Sundar Sharma Vs. Commissioner of Customs (Preventive), West Bengal - Order No. A-1246 - Calcutta/2000 dated 11.08.2000 in Appeal No. C-267/98.
In reply, Shri A.K. Chattopadhayay, JDR submitted that the case was one of fraud, mis-representation and contravention of the provisions of the Customs Act, 1962 (hereinafter referred to as the 'Act'). He relied upon the Supreme Court's decision in the case of Fedco (Pvt.) Ltd. Vs. S.N. Bilgrami - 1999 (110) ELT 92 (SC). Keeping in view the value of the goods sought to be illegally cleared, the quantum of redemption fine and penalty was justified.
4. We have carefully considered the matter.
From the facts on record, it is seen that the appellants had posed themselves as manufacturer exporter for availing of the benefit of customs duty exemption under Notification No. 30/97 Cus dated 1.9.97 (as amended), but they have no manufacturing facilities. They had given confusing and mis-leading address. The gods imported were meant for disposal in the market although the benefit of exemption was available when they were concerned with the manufacture of the goods to be exported. The appellants had obtained quantity based advance licence by fraud and mis-representation. They had mis-represented themselves as manufacturer exporter. The small scale industrial registration was obtained without having any manufacturing unit. On inquiry, it was found that no such small scale industrial unit registration had been issued in favour of the appellants by the concerned authorities of the State government. In the circumstances, there could be no question of their fulfilling the export obligations as manufacturer exporters. The small scale industrial unit registration from the General Manager, District Industries Centre, Dibrugarh, Assam had been obtained by fraud through a broker.
5. The licence was cancelled with retrospective effect, before the clearance of the goods and at the point of clearance there could not be any question of assessing the goods in terms of the exemption Notification no. 30/97 Cus. This position was well recognised by the appellants themselves when they prayed for adjudication and for release of the goods to them on payment of customs duty and appropriate fine. In para-56 of the impugned order-in-Original, the adjudicating authority had recorded as under:-
"56. The two advance licence against which duty free clearance had been sought have since been cancelled by the licensing authorities. Even the importers do not want to sue these licences now and their only request is that without reference to these licences, the goods may be allowed clearance to them on payment of the duty and on fine since these goods need a specific import licence having been restricted for import."
6. Under Notification NO. 30/97 Cus dated 1.4.97 (as amended), materials imported into India against an advance licence with actual user condition in terms of para-7.4 of the Export and Import Policy - 1997-2002 were exempted from the whole of the duty of customs leviable thereon subject to the various conditions as specified in the aforesaid notification. As per Condition (VII), exempt material was not to be disposed of or utilised in any manner except for utilisation or in replenishment of such materials and the materials so replenished shall not be sold or transferred to any other person.
Admittedly, the importers had no manufacturing facilities. The licences were endorsed treating the importers as manufacturer exporters. Thus, the importer at the time of landing itself was, in the facts and circumstances of the case, un-authorised.
7. The goods imported were restricted for import control purpose. Customs duty exemption was available only subject to the various conditions specified therein. Import licence was not the only condition for extending the benefit of customs duty exemption. A number of other conditions were stipulated in the exemption notification. One important condition for manufacturer importer was the existence of manufacturing facilities, which was obviously non-existent in this case. From the facts on record, it is seen;
(i) The address of M/s. Kunal International incorporated in the bill of entry was not correct.
(ii) The address given in the bill of entry was 85 A, Zambrudpur, Greater Kailash Part-I, New Delhi - 110 048.
In the subsequent correspondence, the address given was 86 A, Zambrudpur, Greater Kailash Part-I, New Delhi-110048. Subsequently, it was found that the firm was located at R-105, 85-A, Zambrudpur, New Delhi-110 048.
(iii) Shri Shiv Kumar Jain purported proprietor of M/s. Kunal International was a part of conspiracy to illegally import and un-authorisedly dispose of silk yarn. This position is discussed in paras-17, 18 and 19 of the impugned order.
(iv) The importer company had no manufacturing facilities. In para-26 of the order, it is recorded as under:-
"26. In order to ascertain the veracity of the SSI Certificate submitted by Shri S.K. Jain, Proprietor of M/s. Kunal International before the Jt. DGFT, New Delhi, the officers of DRI conducted an enquiry with the office of the General Manager, District Industries Centre, Dibrugarh, Assam wherefrom it had been confirmed that no such SSI Certificate was issued to M/s. Kunal International under Registration No. AMSI/10/02071/02/FNL dated 15.09.97 by District Industries Centre, Dibrugarh, Assam"
(v) Admittedly, there was no licence for clearance of the goods. In his letter dated 13.08.98, Shri Shiv Kumar Jain had admitted that they were not having any licence in hand and had requested the Commissioner of Customs for clearance of the goods by adjudication (refer para-15 of the impugned order-in-original).
(vi) As a result of investigations made by the Customs, the following facts had emerged:-
a) the official address of M/s. Kunal International i.e. Bhardwaz Plaza, 86A, Zambrudpur, Greater Kailash, Part I, New Delhi-110048 which was furnished by the subject firm in the application form in Appendix 11B for obtaining the subject two Advance Licence Nos. 0500371 dated 6.8.97 and 0500441 dated 10.11.97 had been found to be fictitious one by the DRI Officers i.e. M/s. Kunal International did not exist at the given address.
b) the S.S.I Certificate bearing No. AMSI/10/02071/02/FNL dated 15.9.97 shown the had been issued by District Industries Centre, Dibrugarh, Assam which M/s. Kunal International submitted with their application as well as incorporated the particulars in the form Appendix 11B for obtaining the subject two Advance Licences showing class of Importer as Manufacturer Exporter, on enquiry by the DIR Officers found to bogus one.
c) M/s. Kunal International appeared to have furnished wrong information in the Bills of entry about the class of Importer as Manufacturer Exporter as the firm did not have any SSI Certificate in reality which was the statutory requirement to become a Manufacture Exporter.
d) Shri Shyam Sundar Sharma alias S.S. Sharma who figured in the investigation into forgery of Advance Licence in the Import Scam, also appeared to be the main person in the subject case who appeared to be controlling the entire business of M/s. Kunal International Material evidences collected in this regard by the DRI Officers appeared to indicate that the premises from where M/s. Kunal International was functioning at Delhi is owned by Shri S.S. Sharma. Shri Sharma himself in his statement dated 9.7.98 claimed to be the owner of the premises at Delhi which was the official address of M/s. Kunal International and that he allowed M/s. Kunal International to function from that premises without any rent or monetary consideration. Shri Shiv Kr. Jain, Proprietor of M/s. Kunal International interalia stated in his statement dated 17.8.98 and 18.8.98 that he was the proprietor of the firm on paper only and his employer Shri S.S. Sharma. Shri Jain corroborated the statement of Shri S.S. Sharma that the premises of the official address of M/s. Kunal International at Delhi was owned by Shri S.S. Sharma. Shri S.K. Jain also stated that the local address of the company was shown to be 70/1, G.T. Road, Howrah-711204 at the time of opening the Bank a/c. which was his old residential address and that at the instance of Shri S.S. Sharma he wrote a letter to the bank authority to change the local address as 2A Ganesh Chandra Avenue, Calcutta-13 as the said premises was under control of Shri Sharma and by which Shri Sharma will be able to receive the documents from the bank directly at his office which previously reached his hand via Shri S.K. Jain.
e) Shri S.S. Bhartia @ S.S. Bansal, Partner of M/s. Natraj Enterprises an old time associates of Shri S.S. Sharma who was previously one of the partners of M/s. natraj Enterprises alongwith Shri Bhartia, did not respond in course of investigation inspite of several summons issued to him by the DRI Officers. The said Shri S.S. Bhartia appeared to be the main conspirator in the above mentioned Import Scam and his firm M/s. Natraj Enterprises appeared to have forged an Advance Licence in his company's name and utilised the same in effecting duty free clearance of several consignments of Mulberry Raw Silk through Kandla. The said Shri Bhartia in the subject case also entered into a High Seas Sale Agreement with M/s. Kunal International on 18.11.97 and documents were handed over to M/s. Natraj Enterprises immediately after tat while the Bills of Entry were field by them on 20.2.98. Thus, Shri Bhartia got more than three months time to scrutinise the relevant documents in order to ascertain whether or not the description of the subject goods in covered by the licence of M/s. Natraj Enterprises, before filing the Bill of Entry. Subsequently on 16.3.98 vide his letter Shir Bhartia informed concerned Assistant Commissioner of Customs about the cancellation of the High Seas Sales Agreements of the ground that the description of the subject consignments which were sought to be cleared against the Advance Licence of his company i.e. M/s. Natraj Enterprises against Bill of Entry No. 1834 dt. 20.2.98 and 1804 dt. 20.2.98 was somewhat different and did not match the Advance Licence of his company. Thus even after filing the Bill of Entry on 20.2.98, Shri Bhartia took about a month's time to ascertain the position that his Advance Licence would not cover the subject consignments. DRI embarked upon the investigation into the aforesaid Import Scam in the early part of March 98 and therefore it appeared that, considering his own complicity in the subject Import Scam where his firm i.e. M/s. Natraj Enterprises had forged Advance Licence and cleared duty free consignments, Shri S.S. Bhartia @ Bansal wanted to play safe and withdrew himself from the subject High Seas Sales Agreement M/s. Kunal International which also appeared to be controlled by his associates Shri S.S. Sharma and its purported owner Sri Shiv Kumar Jain did not raise any objection for such late cancellation of the Agreement when the documents were made over as early as on 18.11.97. it appeared that they wanted to shield Shri S.S. Bhartia as well as to keep M/s. Kunal International away from M/s. Natraj Enterprises. It further appeared that when their attempts were foiled by DRI investigation, the company i.e. M/s. Kunal International requested concerned Assistant Commissioner of Customs to adjudicate the consignment which were earlier sold on high seas to M/s. Natraj Enterprise.
8. From the above facts, it is seen tat the goods had been imported in contravention of the provisions of the Customs Act, 1962 as detailed in the impugned order.
9. In the case of Fedco (Pvt.) Ltd. Vs. S.N. Bilgrami - 1999 (110) ELT 92 (SC), the Hon'ble Supreme Court in para-5 of their judgement had held as under:-
"5. It appears to us that in most cases, if not in all cases, where as licence is obtained by fraud or mis-representation, it would be reasonable to think that the person in whose favour the licence has been obtained, cannot but be a party to the fraud or mis-representation."
The Hon'ble Supreme Court held that it will be absolutely unreasonable that a licence obtained by fraud or mis-representation should be allowed to continue.
10. The appellants' counsel had referred to the Tribunal's Order No. A-1246/Calcutta/200 dated 11.08.2000 in the case of Shyam Sundar Sharma Vs. Commissioner of Customs (Preventive), West Bengal - Appeal No. C-267/98. this matter also related to the confiscation of raw silk imported by M/s. Kunal International and imposition of penalty thereon. The order appealed against was the order-in-original No. 117/98 Commissioner dated 12.10.98 passed by the Commissioner of Customs, Calcutta. The present order is No. 107/98 Commissioner dated 21.09.98.
We do not find anything from the above order whether the facts in the present case were placed before the Bench disposing of the appeal of Shyam Sundar Sharma in that case. We do not consider that this decision in any way dilutes the allegations as levelled against M/s. Kunal International and it purported proprietor, Shri Shiv Kumar Jain.
11. A reference has been made to Supreme Court's decision in the case of M/s. Union of India & Anr. Vs. Sampat Raj Dugar & Anr. - 1992 (39) ECR 189 (SC).
We find that the facts in that case where entirely different. That was a case of title to the goods imported when the importer in India did not clear the goods and did not pay for the same to the foreign suppliers an did not retire the documents for the clearance of the goods. The allegations by the Customs also related to the non-compliance of the conditions of advance import licences with regard to the earlier consignments as well as of alleged mis-representation made by obtaining the advance import licences. The foreign supplier had asked for the re-export of the imported goods on the ground that once the Indian importer did not pay for the goods and did not fulfil his part of the obligations the foreign suppliers could not be divested of the title to the goods. In para-24 of the order, the Supreme Court had observed as under:-
"24. It is also significant to notice that it is not the case of the appellants that the first respondent was a party to any conspiracy or other fraudulent plan hatched or sought to be implemented by the second respondent. If that were the case, different considerations would have arisen."
the sequence of events as summarised in para-21 of the present impugned order, would show that the present was a case of fraud and the aforesaid decision of the Hon'ble Supreme Court is of no help to the importers in the present case.
As the duty free clearance under Notification No. 30/97 Cus was subject to the various conditions as specified in that Notification and as the validity of the import licence was only one of those conditions, we consider that the Tribunal's decision in the case of K.K. Manufacturing Co. Ltd. Vs. Commissioner of Customs, Bombay - 1997 (18) RLT 476 (CEGAT) is not applicable to the facts in the present case.
12. In the present case, the appellants have prayed for adjudication of the matter as obviously they could not fulfil the conditions of the exemption Notification No. 30/97 Cus dated 1.4.97. The import licence had been cancelled with retrospective effect. In such a situation, the duty has been correctly demanded and the goods were also liable to confiscation and the importer was liable to penalty.
13. However, keeping in view the facts and circumstances of the case, the amount of redemption fine is reduced from Rs. 15,00,000/- to Rs. 7,50,000/- (Rupees Seven Lakh Fifty Thousand Only) and the penalty imposed on Shri Shiv Kumar Jain is reduced from Rs. 5,00,000/- to Rs. 2,50,000/- (Rupees Two Lakh Fifty Thousand Only). The rest of the order is confirmed.
14. Both the appeals are disposed of in the above terms. Ordered accordingly.
(Pronounced)