Customs, Excise and Gold Tribunal - Mumbai
Ashwin S. Mehta vs Commissioner Of Customs on 15 September, 2005
ORDER Moheb Ali M., Member (T)
1. The above appeals arise out of the order of the Commissioner of Customs (Prev.), Mumbai. In the impugned order, the Commissioner holds that the appellant Shri Manharlal Vora was the real importer of goods cleared under 12 bills of entry filed by Deep Corp. and Niki Traders, that the value declared in those bills of entry did not represent the transaction value; that the real value of the goods, i.e. spherical roller bearings, was indicated in the invoices issued by D.V. International (H.K) Ltd. to Deep Corp; that the real value of NSK Brand Bearings with housings was indicated in the invoices issued by D.V. International to Niki Traders; that Deep Corp. and Niki Traders were set up by Vora to import bearings and bearing housings grossly undervaluing them; that the differential duty is demandable from Vora and the grossly undervalued bearings and bearing housings were liable to confiscation. He imposed penalties on Shri Vora of Nippon Bearings, Ashwin Mehta, his manager, and Shalin Vora, his son who assisted him in the affairs of M/s. Nippon Bearings. These then are the appellants before us.
2. Misdeclaration of value of imported goods, demand for differential duty thereon, liability of the goods in question to confiscation and the liability to penalty under the Customs Act are the issues. The issue as to the person from whom differential duty can be demanded, i.e. whether from the person/persons who held themselves to be importers by filing the bills of entry or from the person/persons who is/are alleged to have caused the imports from behind the scenes has to be addressed first. In the present case the Commissioner held that Deep Corp. and Niki Traders are the fronts - are nothing but dummies - therefore differential duty has to be demanded from Nippon Bearings, the de facto importer. The Commissioner held that the goods imported by the dummies were heavily under invoiced.
3. The factual backdrop is somewhat like this.
4. M/s. Deep Corp. is a proprietary concern owned by one Sirish Mehta. M/s. Niki Traders, again a proprietary firm, is owned by Kirtibhai M. Jariwala. The imports were made in their names.
5. In a statement recorded on 20-11-1995, immediately after the search of premises of M/s. Nippon Bearings, Shri M. Vora says that he is an indenting agent of NSK Bearings, Japan; that he knows one Deepak Vaghani and his company M/s. D.V. International in Hong Kong; that he introduced Sirish Mehta to M/s. D.V. International; that Sirish Mehta introduced him to Kiritbhai (Niki Traders); that he does not know anything about Deep Corp. a firm owned by Sirish.
6. Enquiries with CHA (CHA 11/647) who cleared the consignment of ball bearings imported by Niki and Deep revealed that even though the imports were made in their names, M.V. Vora used to keenly follow the clearance of various consignments belonging to the above named importers.
7. Shri Kiritbhai, the proprietor of Niki Traders, in his statement on 27-11-1995 says that he was introduced to Vora by Sirish and that the imports made by him were financed by Vora; that he only lent his name and all the formalities in regard to imports made by him were performed by Vora; that he signed several blank papers, blank cheques, blank declarations etc. and handed them over to Sirish; that he used to receive 2 to 3 thousand rupees from Sirish for this service; that he received further sums of money amounting to Rs. 81,900/- as commission for lending his name and that he did not import back bearings even though the imports are made in his name.
8. Shalin Vora is the son of H. Vora of Nippon Bearings. He was one of the persons assisting M/s. Nippon Bearings in their business, He was shown invoices DVI/867, 868 and 869/DC/792-93 issued by D.V. International, Hong Kong to Deep Corp. and he stated that the prices indicated in the invoices reflected the correct price and it is at the instance of his father M. Vora the reduced value was shown for the purpose of assessment to duty.
9. Ashwin Mehta is an employee of Nippon Bearings. He looks after the activities of the firm. He admits that Sirish Mehta of Deep Corp. is just a front person. He also says that Jariwala of Niki Traders is a front man. In fact all the imports made in the name of these persons were actually made by M. Vora. He admits that he being an employee of Nippon Bearings corresponded with the foreign supplier in respect of imports made by Niki and Deep and also by Jayashree Enterprises, another firm floated by Sirish of Deep Corp.
10. Shri M. Vora in another statement dated 8-1-1996 admits that he knew Deep Corp. and Niki Traders; that he was the one who arranged the imports made by them; that he got in touch with D.V. International, Hong Kong for the imports made in the name of the two firms stated above; that the differential amount between the manufacturer's invoice and the price shown in invoices tendered to Customs at the time of clearance was remitted by him to M/s. D.V. International, Hong Kong, through illegal channels; he was shown various documents on which the Department relied to establish his role in the imports made by various concerns; that he is prepared to pay the differential duty. He tendered two cheques for a total amount of Rs. 1,15,00,000/- (they were not honoured by the Bank when they were presented by the Department). Some 12 days later he retracted this statement. The Department denied the allegations made by M. Vora in his letter of retraction statement dated 8-1-1996 is in complete variance with the one made on 20-11-1995.
11. Sirish Mehta (Deep Corp.) was traced on 31-1-1996 by the officers. He narrated as to how he imported ball bearings through various firms and how M. Vora promised/paid him commission etc. This statement dated 31-1-1996 is rather detailed one. He agreed that M/s. Deep Corp. was opened only at the instance of Vora. He received commission for lending his name for the imports financed by M. Vora. According to Sirish, Vora seemed to have told him that since Sirish is lending his name only no liability if any that arises out of these imports be on Sirish and that Vora himself would take care of them.
12. M/s. Niki Traders and M/s. Deep Corp. paid Rs. 40 lakhs being the differential duty payable due to under-invoicing of imports made in their names.
13. S/Shri Jariwala and Sirish Mehta (of Niki and Deep) in their statements on different dates stated that the amount of Rs. 40 lakhs paid to the Customs towards duty was not theirs. They did not make any such payments but M. Vora might have, as the imports were his only.
14. Now, on the basis of above investigation it was concluded that the imports made in the name of Niki Traders and Deep Corp. were in fact made by Vora. In all 12 bills of entry (9 by Niki and 3 by Deep) were filed by these two firms. The Department attributes these bills of entry to M. Vora of M/s. Nippon Bearings and demands the differential duty from him.
15. It is an admitted fact that M/s. Nippon Bearings was an indenting agent of M/s. NSK Bearings of Japan. In that capacity he gets a commission from M/s. NSK on the orders booked. In the capacity of an indenting agent M/s. Nippon Bearings places orders on NSK Japan. The allegation in the show cause notice and the finding in the impugned order is that in respect of the 12 bills of entry under which bearings/bearing housings were imported, the real importer was Shri M. Vora who was the managing director of Nippon Bearings. The Commissioner confirmed the demand for differential duty of Rs. 81,32,836.56 and demanded it from Shri M. Vora under Section 28 of the Customs Act even though the bills of entry for the clearance of the goods were filed by M/s. Deep Corp. (3 bills of entry) and Niki Traders (9 bills of entry).
16. Heard both sides.
17. The learned advocate Shri Balani appearing for S/Shri Manharlal Vora, Shalin Vora and Ashwin Mehta pleaded that -
(a) The Commissioner erred in holding Manharlal Vora as the importer even when the bills of entry for clearance of imported goods were filed by Nikki Traders and Deep Corp. holding that they are benami firms of M.L. Vora. There is no evidence to this effect. In the cases of J.B. Trading Corporation , K. Sons Overseas (I) P. Ltd. , Wai Wai Stationery P. Ltd. [2001 (137) E.L.T. 1388 (T) and Biren Shah , the Court and the Tribunal did not allow the defacto importers to step into the shoes of benami importers. In the present case Niki Traders and Deep Corp. were not the benami firms of M.L. Vora but are importers in their own right. Their denial to this effect is with an intention to escape the allegation of under-invoicing.
(b) Cross-examination of proprietors of Niki Traders and Deep Corp. on whose evidence the Commissioner heavily relied in his order was not allowed on frivolous grounds. The Commissioner seemed to have denied cross-examination on the ground that they are co-accused. Denial of cross-examination resulted in violation of principles of natural justice.
(c) The Commissioner relied upon documents which were not authenticated to level the charge of undervaluation. The documents supplied to the appellant (M. Vora) were neither paginated nor indexed. The source of documents supplied to the appellant was not known. The panchnama drawn at M.L. Vora's office does not indicate that all the documents purported to have been shown to Ashwin Mehta were recovered from M.L. Vora's office. No reliance can be placed on the documents obtained from unknown sources without any authentication. In any case if there is any charge of undervaluation, it should be levelled against the importers and not against Shri M. Vora.
(d) Shri M. Vora was compelled to give an incriminating statement and was made to write out cheques covering the alleged differential duty on the imports made by Niki Traders and Deep Corp. However Shri Vora retracted his statement. He denied that the documents shown to him were recovered from his premises granting without admitting that the documents relied upon by the Department prove undervaluation, differential duty if any should be demanded from the importers and not from the alleged financier.
(e) Shri Vora did not pay the amount of Rs. 40 lakhs towards part of differential duty as held by the Commissioner. It was Niki Traders and Deep Corp. who on various dates paid sums of money aggregating to Rs. 40 lakhs. The Commissioner's finding that this amount was paid by Vora is baseless.
18. The learned DR submitted that the evidence tendered by the Clearing Agent who cleared the 12 consignments clearly brings out that Shri Vora was showing interest in the consignments imported by Niki Traders and Deep Corp.; that the goods imported by Niki and Deep were delivered at the premises of Shri Vora; that the statements of Shalin Mehta, son of Shri Vora, and Ashwin Mehta clearly bring out the complicity of M.L. Vora in under-invoicing the ball bearings; the proprietors of Niki and Deep clearly stated that they were dummies acting for a commission to be paid by Shri Vora; that they were name lenders and that the amount of Rs. 40 lakhs paid in their name was actually paid by Shri Vora because he was the real importer. He submitted that the Commissioner rightly demanded the differential duty from Shri Vora. The appellants, i.e. S/Shri M.L. Vora, Shalin Vora and Ashwin Mehta are liable to penalties under Section 112(a) of the Customs Act.
19. We have considered the rival contentions.
20. Section 2(26) defines an importer quote "Importer in relation to any goods at any time between their importation and the time when they were cleared for home consumption includes any owner or any person holding himself to be the importer."
21. In respect of the 12 bills of entry in question Jariwala and Sirish Mehta held themselves to be importers, filed bills of entry, produced the bills of lading in their names and the bills of exchange were transacted through their Banks. For all purposes they held themselves to be the importers. Under Section 28 of the Customs Act they are the persons chargeable to duty being importers (CC v. Trivandrum Rubber Works ].
22. However much after the goods were cleared investigation conducted by the officers seemed to have revealed that they were not, after all, the importers. The Commissioner's finding that M.L. Vora was the real importer is based on the statements of Jariwala (Niki Traders) and Sirish (Deep Corp.), the proprietors of the firms who imported the goods in question. These two persons were not presented for cross-examination as they were held to be co-accused and also that they can't afford to come to Mumbai from Ahmedabad for cross-examination. If that were to be the case, the Commissioner ought not to have relied on the statements of these persons. The Commissioner relies on the statements of co-accused but at the same time, does not present them for cross-examination for that very reason. This is unacceptable.
23. Secondly, the Commissioner holds that Rs. 40 lakhs paid by the importers from time to time towards differential duty was actually paid by Shri Vora. This finding is again based on the two co-accused persons whose cross-examination was denied. Further when the whole investigation was carried out on the basis that Shri Vora was the real importer the Department's acceptance of differential duty paid by Niki Traders and Deep Corp. in 1996 indicates that the Department accepts them to be the importers who are liable to pay the differential duty involved. The Department should have asked Shri Vora to deposit the differential duty if they held him to be the importer. The Department accepted differential duty amount tendered by persons who filed the bills of entry and at the same time seem to be accusing someone else to be the importer in respect of the same bills of entry.
24. The Commissioner also observed that Shri M. Vora wrote out cheques for Rs. 1.15 crores voluntarily after confessing that he was the importer and the goods were under-invoiced. These cheques were drawn by an individual and were not bankers cheques. The officers who received the cheques were aware that they would not be accepted towards payment of duty by the Customs Treasury. It is evident that cheques were taken and not given. Whatever voluntary statement Shri M. Vora had given was retracted soon after.
25. The findings based on the statement of the co-accused and retracted statement cannot be sustained in the absence of supporting evidence.
26. The origin of the seized documents on the basis of which undervaluation is alleged was always questioned by the appellants. The Commissioner does not indicate how and wherefrom they were recovered. We perused the documents. A good deal of them pertained to correspondence between a Chinese manufacturer in China and one D.V. International in Hong Kong. It is not known from where these documents were recovered. Some of the documents pertained to correspondence posterior to the date of filing of the bills of entry. Apart from these discrepancies, the panchnama speaks of box files etc. without disclosing the documents seized during the search of M. Vora's office. The fact that the documents were shown to Ashwin Mehta when his statement was recorded does not mean that he admits that they were recovered from the office of Shri Vora.
27. Apart from all this, the case law cited by the learned advocate in support of his contention that the concept of de facto importer has been rejected by the Tribunal in several cases is seen by us. Even when the evidence was much stronger than in the present case the Tribunal did not entertain the theory of de facto importer. In the present case except the statements of co-accused there is no evidence to suggest that the importer was M. Vora. In fact the documentary evidence (bill of entry, invoice, bill of lading, Bank transaction etc.) clearly establish that Niki Traders and Deep Corp. were the importers. Demand for differential duty should have been confirmed on them. The said firms paid Rs. 40 lakhs to- wards differential duty. The balance is also payable by them provided they have been asked to do so. The Commissioner confirmed the duty on Shri M. Vora on a wrong premise that he was the importer and also imposed a penalty of Rs. 20 lakhs. Since we hold that he was not the importer in law no penalty is imposable on him under Section 112(a) of the Customs Act. We also observe that there was no charge of abetment against him. The show cause notice does not bring out that Shri M. Vora dealt with the goods liable to confiscation. No penalty can be imposed on him under Section 112 of the Customs Act.
28. The Commissioner's findings in regard to the acts of commission and omission by Shalin Vora and Ashwin Mehta, son of Shri M. Vora and manager of Nippon Bearings respectively, clearly bring out that they have not played any role in the imports made by Niki Traders and Deep Corp. Their statements against M. Vora just as can't be used against him, they cannot be used against them also. Since we hold that no demand can be raised against Shri M. Vora, he not being the importer of goods liable to confiscation under Section 111 of the Customs Act, we set aside the penalty imposed on Shalin Vora and Ashwin Me-hta of Nippon Bearings.
29. The importers, Niki Traders and Deep Corp. are not in appeal before us.
30. The appeals of S/Shri Manharlal Vora, Shalin Vora and Ashwin Mehta are allowed.