Customs, Excise and Gold Tribunal - Mumbai
H.K. Shah And Co. And Ors. vs Collector Of Customs (P) on 13 July, 1987
Equivalent citations: 1988(33)ELT409(TRI-MUMBAI)
ORDER K. Gopal Hegde, Member (J)
1. The revision application filed before the Central Government against the Order No. 463-4-65 of 81, dated .11.8.1981 passed by the Central Board of Excise and Customs statutorily stood transferred to the Tribunal for being heard as an appeal.
2. Brief facts necessary for the disposal of this appeal are :
M/s. H. K. Shah & Co. is a partnership firm. The appellants Kantilal Hamirmal Jain and his mother Smt. Umraobai Hamirmal Jain are said to be the partners. The appellant Hamirmal Valchand Jain is the father of the appellant Kantilal H. Jain and he was stated to be the Manager of the firm M/s. H. K. Shah and Co.
On 20.11.1979 the officers of the Marine and Preventive Wing of the Customs Preventive Collectorate, Bombay, on secret information, visited the premises of M/s. H.K. Shah & Co. and since that premises was found locked they visited the premises of M/s. Damani Enterprises. From the records of Damani Enterprises it was seen that they had issued a transport voucher No. 664 dated 29.11.1979 at 10.50 hours in the name of M/s. H. K. Shah & Co. for 114.540 kgs. of silver in the form of chorses, i.e. pieces weighing less than 1 kg. each and having no individual serial numbers stamped on them. Thereafter at about 14.30 hours the said officers visited the premises of M/s. H. K. Shah & Co. and on verfification of the stock they did not find the silver bullion weighing 114.540 kgs. purported to have been purchased by them from M/s. Damani Enterprises. The appellant Hamirmal Valchand Jain when questioned stated that he had already sold the chorses and he also produced his records. Verification of the records showed that between 10.50 hours and 14.30 hours the firm had issued 115 transport vouchers showing retail sale of one or two chorses silver to each purchaser against cash. When questioned regarding the cash Shri Hamirmal stated that it had been sent to the Bank of India Zaveri bazar branch through his Accountant one Mithalal. One of the officers accompanied by the appellant Kantilal proceeded to the bank's branch but Mithalal was not found there nor any cash had been deposited in the bank.
During further investigation the statement of the appellant Kantilal was recorded. He inter alia stated that silver chorses mentioned in voucher No. 664 dated 20.11.1979 of M/s. Damani Enterprises was not received in his partnership premises but his father had brought only the voucher. He, therefore, took entry of the said voucher for 170 silver slabs in his silver stock register and thereafter within a period of one hour, i.e. between 11 hours and 12 hours, he prepared 115 transport vouchers cum bills in various names to show disposal of the 170 pieces of silver weighing 114.540 kgs to 115 purchasers in retail against cash. He also stated that he forged the signatures of the alleged buyers on the transport vouchers. He further stated that the original copies of the vouchers were torn and thrown in gutter. It was also stated by him that his father was handling all the dealings and he did not know of the compensation his father was receiving for making fictitious entries in the record and he produced vouchers.
The appellant Shri Hamirmal Jain in his statement recorded under Section 108 stated among other things that on 20.11.1979 at about 11 hours he brought 4 'pitis' of silver bullion, i.e. 170 chorses from M/s. Damani Enterprises under transport voucher No. 664 and sold all the pieces of silver bullion between 11 hours and 12 hours to 100 to 124 purchasers against cash. He however could not give the names and addresses of any of the purchasers. He also stated that he sent the cash of Rs. 2.5 lakhs to the Bank of India Zavery bazar branch through his accountant Mithalal for depositing the same in the bank. It was also in his statement that he did not pay the cost of the silver to M/s. Damani Enterprises. He had not received their bill.
Shri Makhanlal C. Damani of M/s. Damani Enterprises inter alia stated that the 170 chorses weighing 114.540 kgs. of silver bullion were sold to H.K. Shah & Co. under transport voucher No. 664 dated 20.11.1979 and that Shri Hamirmal 3ain had personally come to his office and stuck the deal at Rs. 227/- per kg. and after signing the transport voucher had taken delivery of the silver bullion but he had not received payments from M/s. H.K. Shah 6c Co. In his further statement recorded on three different dates, the appellant Hamirmal 3ain stated that Mithalal did not deposit the amount but the two cash amounts given to Mithalal namely 2.65 lakhs and 2.5 lakhs were found lying in the cupboard of his office premises and he deposited the said two sums in the Union Bank Mirza Street on 21.11.1979.
During the investigation summons were issued by registered post A.D. to the alleged purchasers of silver chorses and all the summons were received back undelivered with remark 'not known'. Personal enquiries also showed that the names and addresses are fictitious.
On verification of the records maintained in the firm M/s. H.K. Shah & Co. it was noticed that during the period between 4.9.1979 and 20.11.1979 the firm had shown disposal of a total quantity of 4328 Kgs. of silver valued at Rs. 86 lakhs in retail at one or two chorses to each customers against cash. The vouchers are issued keeping a time gap of one or two minutes to one another. The alleged purchasers are also not traceable at the addresses shown in the vouchers.
After the completion of the investigation a show cause notice was issued to the present appellants and the mother of the second appellant.
The Additional Collector of Customs (P) after consideration of the reply to the show cause notice and after according a personal hearing to the appellant imposed a penalty of Rs. 1 lakh on the second and third appellants and Rs. 2 lakhs on the firm M/s. H.K. Shah & Co.
Being aggrieved by the order of the Collector all the 3 appellants preferred an appeal before the Central Board of Excise and Customs. The Board while confirming the penalties on the appellants 2 and 3 reduced the penalty on appellant No. 1 from Rs. 2 lakhs to Rs. 1 lakh. Hence this appeal.
3. During the hearing of this appeal Shri Jain, the learned advocate for the appellant raised the following contentions :
(a) The authorities below were not justified in drawing presumption of attempted export as provided under Section 11(M) of the Customs Act; firstly because according to the allegations contained in the show cause notice the silver was not received by the firm and not sold by the firm and therefore there is no scope to invoke the provisions of Section 11(M). That section gets attracted only if the purchaser or the transferee is found to be a fictitious person or not readily traceable. Secondly, merely because the summons issued were returned undelivered no inference of persons not being there or being fictitious can be drawn. Thirdly, the enquiry stated to have been made is not borne out from any evidence. Fourthly, that the appellants were not- given any opportunity to rebutt the presumption arising under Section 11(M).
(b) The sale of silver chorsis within India will not amount to attempt to export and therefore the goods would not become liable to confiscation and as such penalty contemplated under Section 114 cannot be levied.
(c) There was no evidence whatsoever that the appellants or any of them illegally exported or attempted to export silver and therefore, no penalty can be levied on the appellant or any one of them.
(d) That the authorities below have failed to appreciate and consider that the steps prescribed in Rule 5 are impracticable and amounts to not being fulfilled and therefore, they cannot be enforced. The authorities below have failed to appreciate that the appellants have entered the names and address of the purchasers and in the said circumstances the lower authorities were unjustified in holding that there had been any contravention of the rules or the provisions of the Act.
(e) From the evidence on record it was clear that there were no purchase or sales by the partners or by the firm. The appellants only indulged in creating certain fictitious documents which did not warrant imposition of heavy penalty on the firm as well as on the partners. Shri Jain urged that in similar cases the adjudicating authority as well as. the Board were taking a lenient view and imposing penalties not exceeding Rs. 10,000/-. It was also contended by Shri Jain that in the stay application filed by the appellants they were directed to deposit Rs. 10,000/-, Rs. 5,000/- and Rs. 5,000/- respectively and the amount of penalty may be reduced to amounts ordered in the stay application. Shri Jain also submitted that there was no justification to impose penalty on the firm as well as on the partners.
4. Shri Pattekar appearing for the Collector submitted that all the contentions of Shri 3ain have been considered by the Additional Collector as well as the Board and they have given valid reasons for not accepting those contentions and in the said circumstances and in view of the categorical admission made by the 2nd appellant, the appeal deserves to be dismissed. Shri Pattekar further urged that the authorities below were justified in drawing presumptions arising under Section 11(M). The further contention of Shri Pattekar was that having regard to the object of Chapter IVB the contention of Shri 3ain that the steps stipulated in Rule 5 are onerous and therefore, the rule cannot be enforced, is untenable and in any case the Tribunal has no jurisdiction to hold that the rule is invalid or ultra vires.
5. As regards penalty Shri Pattekar contended that from the order of the adjudicating authority it is clear that the total transactions amounted to Rs. 86 lakhs and in the said circumstances the penalty imposed on the appellant cannot be considered as excessive or harsh.
6. We have carefully considered the submissions made on both the sides. From the statements of the appellant Hamirmal 3ain it is clear that on 20.11.1979 at about 10 AM the firm H.K. Shah & Co. purchased 114.540 kgs. of silver and it was taken delivery by him under transport voucher No. 664 dated 20.11.1979. The statement of Makhanlal C. Damani also established the sale of 114.540 kgs. of silver bullion to M/s. H.K. Shah & Co. His evidence further discloses that Shri Hamirmal 3ain personally came for the purchase and settled the rate at Rs. 2270/-per kg. and signed the transport voucher and took delivery of the silver bullion. According to the statement of Hamirmal he sold the silver chorses purchased from Damani Enterprises to 100 to 125 purchasers against cash. He further stated that even though he does not know the names and addresses of any of the purchasers the names and addresses were entered into the vouchers and the signatures were obtained on the vouchers. But then his son who is the main partner of the firm H.K. Shah & Co. categorically stated that the firm did bot bring 114.540 kgs. of silver purchased under transport voucher No. 664, dated 20.11.1979, but he prepared fictitious vouchers showing retail sales of one or two chorses to each purchaser. It was in the statement of Hamirmal 3ain who according to Kantilal was the Manager of the firm and that on 20.11.1979 he sent the cash realised from the sale through his accountant Mithalal for being deposited in the State Bank. According to him two amounts, viz., Rs. 2.65 lakhs and Rs. 2.5 lakhs were given to Mithalal for being deposited in a bank. The enquiry conducted by the customs officers reveal that no such deposit was made but then Hamirmal in his further statement stated that he found both the amounts in the business premises on the next day.
7. From the review of the evidence the purchase of 114.540 kgs. of silver bullion valued at Rs. 82.6 lakhs from M/s. Damania Enterprises by M/s. H.K. Shah & Co. had been established satisfactorily. Regarding the sales there is discrepancy in the evidence of the father and son. According to the father he sold the entire 114.540 kgs. and obtained signatures on the vouchers from the purchasers. The son however stated that the father did not bring the silver purchased from M/s. Damani Enterprises to the business premises of H.K. Shah & Co. but on the basis of the voucher No. 664, dated 20.11.1979 he prepared several fictitious vouchers showing sale of 170 pieces of chorses to different persons and forged their signatures.
8. Having regard to the admission of the son as to the creation of fictitious vouchers and also having regard to the evidence of the father that he did not know the names and addresses of the purchasers it could safely be concluded that the sales were all to fictitious persons.
9. Chapter IVA and Chapter IVB were incorporated in the Customs Act by Act No. 12 of 1969 with a view to detect the illegally imported goods,to prevent illegal export of certain specified goods.
10. The expression 'illegal export' is defined in Section HH(a). Illegal export means the export of any goods in contravention of the provisions of this Act or any other law for the time being in force. Certain restrictions were imposed on persons possessing and acquiring specified goods. The person possessing specified goods are required to intimate the place of storage. The transport of specified goods are required to be covered by vouchers. Persons possessing specified goods are required to maintain accounts. These aspects are dealt with under Section 113, UK and 11L of the Act. Section 11M which provides for steps to be taken by persons selling or transferring any specified goods reads "except where he receives payment by cheque drawn by the purchaser, every person who sells or otherwise transfers within any specified area, any specified goods, shall obtain, on his copy of the sale or transfer voucher the signature and full postal address of the person to whom said sale of transfer is made and shall also take such other reasonable steps as may be specified by rules made in this behalf to satisfy himself as to the identify of the purchaser or the transferee as the case may be, and if after an enquiry made by a proper officer, it is found that the purchaser or the transferee as the case may be, is not either readily traceable or is a fictitious person, it shall be presumed, unless the contrary is proved, that such goods have been illegally exported and the person who had sold or otherwise transferred such goods had been concerned in such illegal export". The proviso and explanation to this section is not relevant for our purpose.
11. The presumption regarding illegal export arises the moment it is established that the purchaser or the transferee is not either readily traceable or is a fictitious person.
12. In the instant case, the admission of the main partner, namely, Shri Kantilal was that all the purchasers of 114.540 kgs. of silver are fictitious purchasers. No further proof is required to raise the presumption contemplated by Section 11M. In the instant case besides the admission of the main partner, Kantilal, there was also evidence to establish that the so-called purchasers are not real persons but they are fictitious persons. Even if we are to accept the contention of Shri Jain that mere return of the summons with the postal endorsement not found or that there was no evidence as to the independent enquiry held by the department are accepted as correct even then his contention that no presumption can be drawn under Section 11M does not stand scrutiny having regard to the clear and unequivocal admission made by partner Shri Kantilal and other circumstances such as the duration between the vouchers, the impossibility of such vouchers coming into existence if the transactions were to be genuine, all establishes even beyond reasonable doubt that the purchasers are fictitious persons. Therefore the authorities below were justified in drawing on the presumption arising under Section 11M.
13. Shri Jain had contended that the appellant did not have an opportunity to rebutt the presumption. There is no force in this contention. It is true that presumption contemplated by Section 11M is a rebuttable presumption. In the show cause notice issued to the appellants, it was specifically alleged that the alleged retail sales of silver chorses are fictitious and M/s. H.K. Shah have deliberately written false vouchers in an attempt to account for silver which appears to have been illegally exported or attempted to be illegally exported. It was also alleged in the show cause notice that the alleged purchasers were not traceable. Along with show cause notice copies of the statements of the appellant Kantilal and the appellant Hamirmal were also supplied. In his statement Shri Kantilal had admitted that all the vouchers were created by him and he even forged the signatures. Having regard to the allegations contained in the show cause notice and considering the fact that the copies of the statement of Kantilal was also furnished to the appellant it is difficult to accept Shri Jain's contention that the appellant did not have an opportunity to rebut the presumption arising under Section 11M.
14. It was the contention of Shri Jain that the provisions of Section 114 are not attracted inasmuch as the sale of silver chorses took place inside India, and therefore, there was no export or attempted export. There is no merit in this contention. Section 11M was introduced to get over the difficulty of establishing the actual or attempted export of, silver. The unrebutted presumption in this case established illegal export. The further evidence established violation of provisions of Section 11L and also Rule 5 of the Specified Goods (Prevention of Illegal Export) Rules, 1969. Under Section 113(d) the Specified goods becomes liable to "confiscation if any violation of the provisions of Chapter IVB or any rule made under the Customs Act in relation to specified goods takes place. As per the provisions of Section 114 any person who in relation to any goods does or omit 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 will be liable to penalty. Having regard to the above provisions, the contention of Shri 3ain that Section 114 are not attracted has no force.
15. The third contention of Shri 3ain was that there was no evidence of the illegal export or attempted export of silver and therefore there was no scope to invoke imposition of penalty under Section 114 on any of them. There is no substance in this contention. It is true that there is no direct evidence regarding illegal export or attempted export of silver. The department had relied on the presumption arising under Section 11M. That presumption had not been rebutted. Therefore, the illegal export stands established and as such the contention of Shri Jain that no penalty can be imposed under Section 114 requires to be rejected and it is rejected accordingly.
16. The next contention of Shri 3ain that the steps specified in Rule 5 are impossible of performance and therefore the rules cannot be enforced in law also cannot be accepted. Having regard to the object of the Act and the introduction of Chapters IVA and IVB, it is necessary,to place stringent restrictions on persons who possess, acquire and deal in specified goods. We are unable to accept Shri Jain's contention that the steps specified in Rule 5 are not capable of complying with and on that count the rule cannot be enforced. Even if we are to hold that the restrictions contained in the rule are unreasonable, we have no power or jurisdiction to hold the rule as ultra vires or inoperative. We, therefore, reject Shri Jain's contention.
17. The last of the submission made by Shri Jain was that the penalty imposed on the appellants are harsh and unreasonable. He had urged that from the evidence it is clear that there were no purchase of silver or sales but the appellants only created certain documents in order to help some others and in all such cases the penalty on the person who created documents did not exceed Rs. 10,000/-. His further contention was that in the stay application the applicants were directed to deposit Rs. 10,000/-, Rs. 5,000/- and Rs. 5,000/-. It was also urged by Shri Jain that it was harsh to impose penalty on the firm as well as the partner.
18. It is not possible to accept Shri Jain's contention that the purchase in this case are fictitious at least in respect of 114.540 kgs. The seller and the purchaser have admitted the sale and purchase. There is no other contra evidence. Subsequent sale transactions to 100s of persons are only fictitious. Therefore, it is not possible to accept Shri Jain's contention that both the purchases and the sales are fictitious. Shri Jain had not produced any order where penalty was restricted to Rs. 10,000/- in similar types of cases. Mr. Jain's contention that in the stay application the applicants were directed to deposit Rs. 10,000/-, Rs. 5,000/- and Rs. 5,000/- and therefore the penalty should be reduced to that amount also cannot be accepted. One of the factors that heavily weighed with the Tribunal at the time of granting stay was that insistence of deposit of the entire penalty amount would not only cause undue hardship but ultimately result in the appeal not being heard on merit. Therefore, that contention of Shri Jain is not relevant. There is some force in the contention of Shri Jain that the penalty on the firm as well as on the partner was not called for. The Collector had exonerated another partner. By imposing a penalty on the firm the exonerated partner would be required to bear the penalty- Without going into the legal aspect whether there could be penalty both on the partner and the firm, we consider that the ends of justice require that the penalty on the firm should be set aside. Accordingly, we set aside the penalty on the firm. We, however, do not see any justification to reduce the penalty on the main partner as well as the Manager. We confirm the penalty imposed on Hamirlal Jain and Kantilal Jain.
19. In the result, we set aside the penalty imposed on M/s. H.K. Shah & Co. In other respects we confirm the orders passed by the authorities below. The appellant H.K. Shah & Co. be granted consequential relief by way of refund of the penalty amount deposited by it.