Custom, Excise & Service Tax Tribunal
Rbs Home Appliances Pvt Ltd vs Commissioner Of Customs (Import), ... on 15 June, 2009
IN THE CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL WEST ZONAL BENCH AT MUMBAI COURT NO. Appeal Nos. C/190 & 191/08 (Arising out of Order-in-Original No. 14/CAC/CC(I)/SP/Gr.VA dated 11.1.2008 passed by Commissioner of Customs (Import), Mumbai.) For approval and signature: Honble Mr.P.G. Chacko Member (Judicial) ======================================================
1. Whether Press Reporters may be allowed to see : No the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?
2. Whether it should be released under Rule 27 of the : Yes CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?
3. Whether Their Lordships wish to see the fair copy : Seen of the Order?
4. Whether Order is to be circulated to the Departmental : Yes authorities?
====================================================== RBS Home Appliances Pvt Ltd Smt Jagruti Jayraj Pandit Appellants Vs Commissioner of Customs (Import), Mumbai Respondent Appearance:
Shri Prakash Shah, Advocate, for Appellants Shri Manish Mohan, S.D.R, for Respondent CORAM:
Honble Mr.P.G. Chacko Member (Judicial) Date of Hearing: 15.06.2009 Date of Decision: 15.06.2009 O R D E R NO..
1. In the impugned order, which was passed in adjudication of a show-cause notice dated 5.4.2007, the learned Commissioner of Customs (Import) passed following order:
38.1. I hold that the goods imported vide B/E No. 6470 dated 17.11.1997 were imported without Special Import Licence in contravention of the provisions of Exim Policy Rules and Regulation.
38.2. I order confiscation of goods imported vide B/E No. 6470 dated 17.11.1997 valued at Rs 24,31,636/- (Rupees: Twenty four lakhs thirty one thousand hundred and thirty six only) which were cleared against the forged Special Import Licence No. 0011315 dated 27.12.1996 under Section 111 (d) & 111 (o) of the Customs Act, 1962. I, however, redeem the same on payment of redemption fine of Rs 7,00,000 (Rupees Seven lakhs only) by RBS Home Appliances Pvt Ltd under Section 125 of the Customs Act, 1962.
38.3. I impose a penalty of Rs 1,00,000/- (Rupees One lakh only) on M/s RBS Home Appliances Pvt Ltd under Section 112 (a) of the Customs Act, 1962.
38.4. I am imposing penalty under Section 112 (a) of the Customs Act, 1962 on the following persons.
(i) Rs 20,000/- (Rupees Twenty thousand only) on Smt Jagruti Jayraj Pandit, the then Manager (Finance) of M/s RBS Home Appliances Pvt Ltd.
(ii) Rs 10,000/- (Rupees: Ten thousand only) on M/s Blue Star Enterprises.
(iii) Rs 10,000/- (Rupees: Ten thousand only) on M/s Milan Enterprises.
38.5
2. 312 units of fully automatic washing machines had been imported by M/s RBS Home Appliances Pvt Ltd (appellant in Appeal C/190/08) on the strength of Special Import Licence No 0011315 dated 27.12.1996. A Bill of Entry was filed for the clearance of these goods. It was assessed by the proper officer of customs and, on the basis of his order, the goods were cleared on payment of duty. In the year 1998, officers of the Directorate of Revenue Intelligence (DRI) unearthed cases of forgery of Special Import Licences (SILs) by certain importers including one M/s Reliable Overseas. It was found that SIL No 0011315 dated 27.12.1996, whereunder the goods in question were imported, stood in the name of M/s Reliable Overseas. This licence was found to have been transferred to one M/s Blue Star Enterprises and subsequently to one M/s Milan Enterprises and then to M/s RBS Home Appliances Pvt Ltd. The licence in the hands of M/s RBS Home Appliances Pvt Ltd showed that it had been used in October 1997 for import of one consignment of computer parts etc of CIF value of Rs 2,26,616/- and subsequently a consignment of cotton fabrics valued at Rs 59,735/- CIF. The total CIF value assigned by the licensing authority (DGFT) was Rs 1,29,83,870/-. After deducting the value of the aforesaid imports, M/s RBS Home Appliances had a net value of Rs 1,26,97,519/-, out of which Rs 24,07,561 was utilized for the importation of washing machines covered by the aforesaid Bill of Entry. Though the investigations against the original licensee were commenced as early as in 1998, no enquiries were made against the transferees of the licence till 9.8.2006 when a summons was issued to Smt Jagruti Jayraj Pandit, Finance Manager of M/s RBS Home Appliances. A statement was recorded from Smt Jagruti Jayran Pandit under Section 108 of the Customs Act, wherein she stated that a Special Import Licence had been obtained from M/s Milan Enterprises. When confronted with documents issued from the office of the DGFT, Bhopal, she admitted that the said licence was a forged one. However, she did not accept the suggestion of the interrogating officer that their company was liable for consequences of the offence committed by the original licensee. Similar statements were given by other functionaries of M/s RBS Home Appliances. A statement of one Shri Murari Shah, proprietor of M/s Milan Enterprises was also recorded under Section 108 of the Customs Act. He denied having sold the licence to M/s RBS Home Appliances. He also stated that he did not known M/s Blue Star Enterprises. He also pleaded ignorance of the identity of the person (one Mr Agarwal), from whom, according to Smt Jagruti, the licence had been purchased. A statement of one Shri Panchena Gopinath, Senior General Manager of Reliable Group was also recorded under Section 108 of the Customs Act, wherein he stated inter alia that his company namely M/s Reliance Overseas had not obtained SIL No 0011315 dated 27.12.1996 from DGFT and therefore there was no question of its transfer to anybody else by them. In that statement, he also stated that the I.E. Code mentioned in the above licence did not belong to M/s Reliable Overseas. When a transfer note of M/s Reliable Overseas certifying transfer of the licence for Rs 1,29,83,870/- to M/s Blue Star Enterprises, New Delhi was shown to him, Shri Gopinath stated that the letter head used for the transfer note was not theirs, nor was the signature in the transfer note that of any of their partners or officials. Finally Shri Gopinath expressed the doubt that the transfer note itself was a forged or fabricated document. After completing the enquiries, the department issued a show-cause notice to M/s RBS Home Appliances, Smt Jagruti Jayraj Pandit and others proposing to confiscate the goods covered by the Bill of Entry under Section 111 (d) and (o) of the Customs Act, 1962 as also to impose penalties on the noticees under Section 112 of the Act. These proposals were contested. It was in adjudication of this dispute that the Commissioner passed the aforesaid order.
3. The learned Counsel for the appellants submits that the redemption fine imposed in lieu of confiscation of the goods has to be vacated at once in view of the Tribunals Larger Bench decision in Shivkripa Ispat Ltd vs Commissioner Customs & Central Excise, Nashik 2009-TIOL-388-CESTAT-Mum-LB, wherein it was held that, where the goods were not available for confiscation, it was not open to quasi-judicial authorities under the Customs Act to impose any redemption fine. The learned Counsel has also challenged the penalty on a few grounds. Firstly, it is submitted that there is no evidence of the appellants having done anything or omitted to do anything which rendered the goods liable to confiscation. They are bona fide purchasers of the licence. The two earlier imports under the licence were duly cleared by the customs authorities who had not raised any doubt at that time regarding the genuineness of the documents. When the goods in question were imported, again, there was no doubt whatsoever and the goods were allowed to be cleared without any demur. Even in the show-cause notice, the department has no case that the appellants had imported the goods under the licence in question with any knowledge of its forged character. No allegation of any kind of complicity in the forgery committed by the licensee was levelled against the appellants. In the circumstances, the learned Counsel argues, it cannot be said that the appellants used the licence for clearance of the subject goods with any mens rea. Therefore, Section 112 (a) of the Customs Act, 1962 is not invocable against them. The second ground raised by the learned Counsel is that the heavy delay involved in the issue of the show-cause notice has vitiated the entire proceedings. In this context, the learned Counsel refers to the Honble High Court of Punjab & Haryanas decision in Neeldhara Weaving Factory vs DGFT, New Delhi 2007 (210) ELT 658 (P&H), wherein a penalty imposed on the writ petitioner after 14 years of certain default was set aside on the ground of delay.
4. On the other hand, the learned S.D.R is of the view that the Honble High Courts decision is not applicable to the facts of the present case. It is pointed out that the default found in Neeldhara Weaving Factory case (supra) was non fulfilment of export obligation unlike the grievous offence of abetment of fraud found in the present case. On the facts of this case, therefore, the ratio of the High Courts decision cannot be applied. The D.R. has then proceeded to address the principal issue as to whether the purchaser of a forged licence is liable to be proceeded against. In this connection, he relies on the Supreme Courts decision in Commissioner of Customs (Preventive) vs Aafloat Textiles (I) P Ltd 2009 (235) ELT 587 (SC). In the same case, earlier, the Tribunal had set aside a penalty which had been imposed on the above company under Section 112 of the Customs Act, 1962. That was based on the finding that there was no proof of misstatement or suppression of facts in that case. The Honble Supreme Court set side the Tribunals decision and restored the penalty to M/s Aafloat Textiles (I) Pvt Ltd, after holding that the purchaser of the gold and silver imported under SIL was running a risk and that he had the burden of taking precautions to ensure the genuineness of the licence under which the goods were to be imported. The Supreme Court, thus, enforced the caveat emptor principle against the transferee of the goods imported under the forged licence. The S.D.R. heavily relies on this judgment of the apex Court.
5. I have considered the submissions. On the last occasion, I wanted to see the original licence, the so-called bulletin, the Customs Manual etc and gave opportunity to both sides to produce the same. Today I am told that the original licence is not available and that no bulletin was ever received by the department from the DGFT. However, the S.D.R. has produced a write-up on the functions of the Licence Department of the Customs House. This document indicates that there was a practice of the DGFT issuing fortnightly bulletins to the Customs department. These bulletins contained the details of the licences issued by the DGFT. The Licence Department of the Customs House would verify the authenticity of the licences from the particulars given in the relevant Bills of Entry. Where the bulletin is received late, verification is restricted to genuineness of the signature of the licensing authority. This limited verification is done on the basis of specimen signatures of the said authority. Woefully enough, it is stated, the Customs department has not received any bulletin from the DGFT for years together. This fact is quite evident from a copy of SIL No 0011315 dated 27.12.1996 available on record, which indicates that the Customs verification of the licence was done without a bulletin.
6. A decision has to be taken in this case on the aforesaid facts and evidence.
7. The question whether the redemption fine has to be sustained on the facts of this case requires to be addressed in view of the Tribunals Larger Bench decision cited by the learned Counsel. That the decision is found to be in favour of the appellants. As the goods were admittedly not available for confiscation when the impugned order was passed, the fine has to be vacated inasmuch as it is not the Revenues case that the goods were provisionally released to the importer against execution of bond or other undertaking. Ordered accordingly.
8. The remaining question pertains to the penalty imposed on the appellant under Section 112 (a) of the Customs Act, 1962. For a penalty of this kind, it has to be shown that the person who is sought to be penalised has, in relation to any goods, done or omitted to do any act which act or omission renders such goods liable to confiscation under Section 111 or has abetted such commission or omission. In the present case, the Commissioner has not found the Special Import Licence having been forged by the appellants, nor is it his finding that any of the appellants in any way abetted forgery of the licence. The finding against the appellants is that they had deliberately procured the licence from an illegal source with full knowledge of forgery. It has also been found that the appellants, by not providing the exact details of the source of the licence, indulged in evasive action indicative of mens rea and therefore the goods in question were rendered liable for confiscation. Having perused the statements of witnesses recorded by the investigators under Section 108 of the Customs Act, I have not come across any instance of Smt Jagruti or any other functionary of M/s RBS Home Appliances having conceded knowledge of any fraud committed by the original licensee. Therefore, the above finding of the Commissioner appears to be baseless. Of course, in the case of Aafloat Textiles (supra), the Honble Supreme Court placed burden of proof on the transferee of a forged licence. It was held that it was for the buyer to establish that he had no knowledge about the genuineness or otherwise of the Special Import Licence in question. The rule of caveat emptor was pressed into service and accordingly it was held that it was the bounden duty of the purchaser to make all necessary enquiries in relation to the property to be purchased prior to the purchase. In the case considered by Their Lordships, the SILs were not genuine documents and were forged. It was held that, in the eye of law, the documents had no existence as SILs. On this basis, the Honble Supreme Court held that the extended period of limitation was applicable for recovery of duty from the importer/purchaser of SIL. The learned Counsel has argued that, in a case where the transferee of forged licence has pleaded ignorance of the forgery, the burden of proof would shift to the department. In the present case, I have already found that the appellants consistently pleaded ignorance of the forged nature of the licence used by them for import of the goods in question. Even the genuineness of the transfer note issued by M/s Milan Enterprises to M/s RBS Home Appliances Pvt Ltd (appellant) was questioned by the latter when confronted with the said document under Section 108 of the Customs Act, 1962. In this scenario, I am of the considered view that there was a shift of onus of proof to the customs authorities. In the present case, even this burden has not been attempted to be discharged. In the circumstances, it will not be correct to apply to the present case the ratio of the decision of the Supreme Court in Aafloated Textile case (supra). The department has not succeeded in establishing that the appellants, by any commission or omission, rendered the subject goods liable to confiscation. They have not even made out a case of abetment of the offence of forgery of licence, against the appellants. In the result, the appellants succeed in their challenge against the penalties imposed on them.
9. At the same time, I have not found favour with the plea of the learned Counsel that the penalty should be set aside on the ground of heavy delay. The case law cited by him cannot be applied to the facts of this case. In the case of Neeldhara Weaving Factory (supra) what was found against the party was a mere default in discharge of export obligation in relation to the goods imported by them. Such a default, by no stretch of imagination, can be compared with the grievous offence, alleged against the appellants, of having deliberately imported prohibited goods on the strength of a forged licence with knowledge of the forgery. Therefore, the view taken by the Honble High Court in Neeldhara Weaving Factory (supra) will be of no aid to the appellants.
10. Nevertheless, for the reasons already recorded, there can be no penalty on the appellants.
11. In the result, these appeals are allowed.
(Dictated in Court.) (P.G. Chacko) Member (Judicial) rk 10