Jyoti Balasundaram, Member (J)
1. The above applications have been filed by the Revenue for stay of operation of the impugned order of the Commissioner of Customs, Mumbai by which he has confirmed the duty demand of Rs. 9,74,52,797/- against M/s. Kunal Overseas Limited and its Partner Shri Paresh Parekh, imposed a penalty of Rs. 10 crores on both the above mentioned persons and dropped proceedings against the remaining co-noticees, including the respondents in the present applications.
2. The background of the case is that M/s. Kunal Overseas Limited purchased on high sea sales basis large quantities of plastic moulding powders like HOPE, LDPE, PVC, etc., from M/s. M.K. Industries, M/s. Anant B. Timbadia & Company, M/s. Par Petro Chem Ltd., Petro Impex. (I) Private Limited and M/s. Bishwanath Industries Limited; and subsequently cleared them free of customs duty against advance licences under DEEC Scheme. The advance licences were granted under actual user condition. Subsequent investigations by DRI revealed that M/s. Kunal Overseas Limited had unau-thorisedly sold the goods cleared free of duty in the local market in contravention of the actual user condition under the licence. The case was investigated by the DRI from which it transpired that:
(a) M/s. Kunal Overseas Ltd. had obtained 11 advance licences from Jt. DGFT, Mumbai by showing M/s. Plast Containers, Palghar as their supporting manufacturer. The advance licences contained a condition that the resultant export products will be manufactured out of the imported duty free raw material, at the supporting manufacturer's unit.
(b) M/s. Kunal Overseas Ltd., imported a total quantity of 6634.592 MTS of various plastic raw materials valued at Rs. 14,11,64,759 /-which was cleared under benefit of Customs Notification No. 30/97, dated 1-4-1997.
(c) They utilised the said advance licences to clear plastic raw materials like LDPE, HOPE, PVC resin, etc., which they had purchased on high sea sales basis from various parties and on "bond to bond" transfer from some other parties.
(d) The goods cleared against the advance licences did not go to the supporting manufacturer, M/s. Plast Containers, Palghar. The documents showing the name of M/s. Plast Containers, Palghar were bogus as M/s. Plast Containers had no knowledge that they were being shown as supporting manufacturers in DEEC book.
(e) The goods cleared against 11 advance licences appear to have been sold in the local market in contravention of the conditions of Customs Notification No. 30 of 1997.
(f) The entire import was financed by Shri V.K. Gandhi, the original importer and the advance licences of M/s. Kunal Overseas Limited were used to clear the goods duty free.
(g) Shri Virendra K. Gandhi, Shri Anant B. Timbadia, Shri Sharad Shah, Shri Sunil B. Agarwal, Shri K.B. Rai and Shri Pankaj Mehta of M/s. Rashmi Shipping Agency, aided and abetted Shri Paresh H. Parekh in the evasion of customs duty by using forged supporting manufacturer's documents for effecting duty free clearances of the goods. After duty free clearance, they sold the said goods in the local market and were also monetarily benefited in the sale. Shri Virendra K. Gandhi, Shri Anant Timbadia, Shri Sharad Shah, Shri Sunil Agarwal, Shri Biswanath Pasari, Shri K.B. Rai and Shri Pankaj Mehta knowingly and with full knowledge conspired with Shri Paresh Parekh of M/s. Kunal Overseas Limited to defraud customs duty. They were aware that the goods cleared against 11 advance licences were under the actual user condition and that these goods could not be sold in the local market but should have gone to the supporting manufacturer for the manufacture of the resultant export product. They were aware that diversion and sale of these goods was illegal and in contravention of the conditions of Notification No. 30/97-Cus. and the provisions given in Chapter 7, Vol-1 Handbook of Procedures of the Export and Import Policy AM-1997-2002. By conniving with Shri Paresh Parekh, they actively participated and abetted in evasion of the customs duty by misuse of DEEC scheme and have actively participated in the sale of the goods.
3. Show cause notice was issued proposing confiscation of goods cleared under the 11 advance licences obtained by M/s. Kunal Overseas Limited in terms of Sections 111(d) and (o) of the Customs Act, 1962, proposing recovery of duty of Rs. 9,74,52,797/- jointly and severally from:
Duty Amount (Rs.)
M/s. Kunal Overseas Limited and M/s. Anant B. Timbadia & Co.
M/s. Kunal Overseas Limited and M.K. Industries Ltd.
M/s. Kunal Overseas Ltd., M/s. Bishwanath Industries Ltd., M/s. Par Petro Chem Ltd. and M/s. Petro Impex (I) Pvt. Ltd.
M/s. Kunal Overseas Ltd.
in terms of the proviso to Section 28 of the Customs Act, proposing adjustment of an amount of Rs. 3,57,25,000/- already deposited voluntarily against the duty payable and proposing levy of interest. The notice also proposed penal action against M/s. Kunal Overseas Limited, under Section 112(a) and (b) or 114A of the Customs Act, 1962 against M/s. Kunal Overseas Limited and other noticees for acts of omission and commission rendering the goods liable to confiscation under Section 112. The notice was adjudicated by the Commissioner of Customs, who confirmed the demand as set out above and imposed a penalty of Rs. 10 crores on M/s. Kunal Overseas Limited and Paresh Parekh jointly but dropped proceedings against other noticees. He held that as a consequence of the dropping of the proceedings against co-noticees, any amount that has been paid by them on their own account will have to be refunded. The Revenue seeks stay of operation of the order in so far as it relates to directing refund of Rs. 2,00,30,000/- paid by Shri V.K. Gandhi and of Rs. 20,00,000/-paid by M/s. Anant B. Timbadia & Company.
4. According to the department the Commissioner's direction for refund is illegal as the record shows that deposits were made by Shri V.K. Gandhi/Dimple Overseas Limited on behalf of M/s. Kunal Overseas Limited voluntarily and the duty receipts indicate them as such and since this amount was paid voluntarily towards V.K. Gandhi's share of basic customs duty even though Dimple Overseas Limited had not imported or sold on high sea sales basis any goods to M/s. Kunal Overseas Limited, this amount representing the duty on goods purchased from M/s. Bishwanath Industries Limited, M/s. Par Petro Chem Ltd. and M/s. Petro Impex (I) Pvt. Ltd., ought to have been adjusted towards duty and penalty against M/s. Kunal Overseas Limited in whose name the deposits under 25 bank drafts were made by Dimple Overseas Ltd./V.K. Gandhi.
5. As regards M/s. Anant B. Timbadia & Company the prayer of the Revenue is that the amount of Rs. 20 lakhs deposited by them under five drafts voluntarily was towards duty, and that should be adjusted towards duty and penalty upon M/s. Kunal Overseas Limited in whose name the deposits were made.
6. We have heard Shri Sethna, learned Senior Counsel for the Revenue, Shri J J. Bhatt, Senior Advocate for Shri V.K. Gandhi and Shri H.R. Shetty, Advocate for M/s. Anant B. Timbadia & Company.
7. We find that the charge of obtaining advance licences under DEEC scheme without having any manufacturing unit with the intention of importing duty free raw materials, disposing the same in the domestic market for monetary gains, failure to utilise the imported duty free goods against actual user licence in the manufacture of resultant export products, resulting in contravention of the advance licences and Notification 30/97-Cus., dated 1-4-1997 as amended, rendering the imported goods liable to confiscation, has been prima facie levelled only against M/s. Kunal Overseas Limited, who are also alleged to have wilfully suppressed the fact of diversion of duty free imported goods into the local market, attracting the proviso to Section 28 of the Customs Act, 1962. The prima fade charge against the respondents is that they aided and abetted Shri Paresh Parekh of Kunal Overseas Limited in the evasion of customs duty as they used the forged supporting manufacturer's documents for effecting duty free clearance of the goods, selling the same in the domestic market and also monetarily benefiting in such sale; thus, rendering them liable to penalty under Section 112 of the Customs Act. We also note that the payment of Rs. 2,00,0,000/- by Dimple Overseas Limited under cover of letter dated 29-1-1999 has been accepted by the Commissioner as bargain deposit for seeking his release from jail. According to the Commissioner Shri V.K. Gandhi was first arrested on 18-1-1999, his residence was sought to be searched on 22-1-1999, search at his office and residence took place on 25-1-1999, payment of Rs. 2,00,30,000/- was made on 29-1-1999 and he was subsequently released on bail. The above dates are not controverted by the Revenue.
8. We further note the stand of the department, while opposing the prayer of M/s. Kunal Overseas Limited for waiver of pre-deposit of duty and penalty (in order No. C-I/1520/WZB/2002, dated 27-5-2002 in application No. C/Stay-2103/2001-Mum. in appeal No. C/909/2001-Mum.) that it support the finding of the Commissioner that since according to the show cause notice memo itself there is no duty demandable from Shri V.K. Gandhi or from M/s. Dimple Overseas Limited, the deposits collected from them of Rs. 2,00,30,000/- is to be refunded forthwith. It was on this basis the Revenue opposed request of M/s. Kunal Overseas Limited to reduce the pre-deposit amount by the amount of Rs. 2,00,30,000/- paid by Shri V.K. Gandhi and Rs. 20,00,000/- paid by M/s. Anant B. Timbadia & Company and the Tribunal prima facie held that the deposits made during enquiries, which is required to be adjusted against final confirmation amount, would only be Rs. 1,56,95,000/- (amount already paid by M/s. Kunal Overseas Limited during investigation) and directed further deposit of Rs. 8,17,57,797/- rejecting the contention that pre-deposit made during the course of enquiry should be taken as Rs. 3,57,25,000/-.
9. In the light of the above we hold that there is no prima fade substance in the contention of the department that the amount of Rs. 2,00,30,000/- paid by M/s. Dimple Overseas Limited/Shri V.K. Gandhi represents the duty payable in the present case so as to be available for adjustment towards duty and penalty confirmed and imposed against M/s. Kunal Overseas Limited. [We also note that the amount paid by M/s. Dimple Overseas Limited has been deposited in the Bombay High Court in terms of the directions given by the Court on 12-6-2002 in Writ Petition No. 597 of 2002 and the High Court has directed that if no appeal is filed by the Revenue within a period of three months or in the event that no stay is granted, the bank guarantee, directed by the High Court to be furnished, for withdrawing the above amount will stand discharged]. We are therefore of the view that no prima facie case has been made out by the Revenue for stay of operation of the impugned order in so far as it relates to directing refund of Rs. 2,00,30,000/- to M/s. Dimple Overseas Limited/V.K. Gandhi and accordingly we dismiss the application C/Stay-2398/2002.
10. As regards the remaining two applications, the respondents in C/Stay-2450/2002-Mum. is M/s. Anant B. Timbadia & Company and Shri Anant B. Timbadia is the respondent in C/Stay-2451/2002-Mum. On queries from the Bench Shri Shetty confirms that M/s. Anant B. Timbadia & Company is a proprietary concern represented by its proprietor Shri Anant B. Timbadia. Learned Counsel for the Revenue does not controvert this. The material on record shows that Anant B. Timbadia is the proprietor of M/s. Anant B. Timbadia & Company. This being so, only one appeal is required, as in the eye of law, the proprietor and the proprietary concern are one and the same. Hence we dismiss the application No. C/Stay-2450/2002-Mum and appeal No. C/817/2002-Mum. filed by the Revenue against M/s. Anant B. Timbadia & Company as not maintainable.
11. As regards Shri Anant B. Timbadia, although he paid Rs. 20 lakhs towards duty liability in this case, we find that the show cause notice prima facie treats only M/s. Kunal Overseas Limited as the person liable to pay duty for violation of Notification 30/97, benefit of which was sought by M/s. Kunal Overseas Limited as the importer, and that the proviso to Section 28 has been invoked only against M/s. Kunal Overseas Limited. The notice treats Anant B. Timbadia as an order and abettor of Shri Paresh Parekh of M/s. Kunal Overseas Limited in the evasion of customs duty along with Shri V.K. Gandhi and others. Shri Timbadia has been held, along with others, to have actively participated in evading duty and misusing the DEEC scheme in connivance with Shri Paresh Parekh, thus rendering him liable to penalty under Section 112 of the Customs Act, 1962. In this view of the matter although the liability for duty has been cast upon in the show cause notice jointly and severally on M/s. Kunal Overseas Limited and Anant B. Timbadia, we hold that no prima facie case has been made out for stay of operation of the order in so far as it relates to direction for refund of Rs. 20 lakhs paid by Shri Anant B. Timbadia. Application C/Stay-2451/2002-Mum. is hereby rejected.
12. In the result while stay applications against Shri V.K. Gandhi and Shri Anant B. Timbadia are dismissed, appeal C/817/2002-Mum. and application C/Stay-2450/2002-Mum. against M/s. Anant B. Timbadia & Company are dismissed as not maintainable.
(Ms. Jyoti Balasundaram)
J.H. Joglekar, Member (T)
13. While agreeing with the findings of the Member (Judicial) I would like to comment on some of the aspects of the dispute.
14. Appeal No. C/788/2002 filed by the Revenue shows Shri V.K. Gandhi as the respondent. The evidence disclosed in the show cause notice was the basis of the charge that Shri V.K. Gandhi along with a number of other named persons was responsible for clearance of imported plastic granules without payment of duty by misusing the advance licence obtained by M/s. Kunal Overseas Ltd. The Commissioner of Customs on discussion of the evidence before him, exonerated Shri V.K. Gandhi. During the course of the investigation Shri V.K. Gandhi had deposited through his company M/s. Dimple Overseas a sum of Rs. 2,00,30,000/-. The show cause notice sought this amount to be adjusted against the duty alleged to have been evaded by M/s. Kunal Overseas Ltd. The Commissioner (Appeals) observed that in the show cause notice no demand had been raised against V.K. Gandhi for payment of duty. Citing the Supreme Court judgment in the case of Dabur India Ltd. v. State of Uttar Pradesh [1990 (49) E.L.T. 3 (S.C)] he directed refund of the money deposited by V.K. Gandhi. He found that the charges against that the V.K. Gandhi had not been proved and refrained from imposing penalty upon him. In the appeal by Revenue challenge has been made of the logic leading to the non-imposition of penalty on Gandhi and the directions of refund of the amount is claimed to be improper on the ground that the procedure under Section 27 of the Customs Act, 1962 was not followed.
15. In the stay application the prayer is made only for stay of the observations for refund of the amount deposited by M/s. Dimple Over-seas/V.K. Gandhi.
16. Show cause notice dt. 27-7-99 from which the proceedings commenced, invoke the provisions of Section 28 of the Act, in the title itself. However in paragraph 11(b) the name of Gandhi is not shown as the person from whom the duty short-levied was demanded under Section 28 of the Act.
17. Therefore the show cause notice itself did not fix any legal liability to pay duty on Shri V.K. Gandhi.
18. Seciton 28 of the Act requires a notice to be served "on the person chargeable with the duty".
19. Who is this "person"? The answer is available in the report of the Select Committee who had recommended the period of 5 years as adequate for raising demands in the case of fraud etc. In this report the "person" is the description as "the importer or an exporter, as the case may be........".
20. Section 2(26) reads as follows :
"Importer, in relation to any goods at any time between their importation and the time when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer".
21. It would appear that the Revenue are seeking to attach the label of the importer to V.K. Gandhi on the ground that he was involved in the scheme of imports of duty free material for unlawful disposal. At the same time it has come in the proceedings and it is not the contested that the bill of entry had been filed by M/s. Kunal Overseas Ltd., that in the import manifest M/s. Kunal Overseas has been declared as the importers and also that the Commissioner in his order had fixed liability of payment of duty on M/s. Kunal Overseas Ltd.
22. The issue whether in the face of a person filing a bill of entry as an importer, another person could be held to be an importer had come up for consideration of the Madras High Court in the case of J.B. Trading Corporation v. Union of India [1990 (45) E.L.T. 9]. In this case M/s. Continental Silk House had filed bills of entry through their CHA. The importer was found to be non-existent. The licences were found to have been obtained by fraud and misrepresentation on the strength of fabricated documents. Both customs and the CCIE had issued show cause notice to M/s. Continental Silk House for confiscation of the goods and for cancellation of the licence, respectively. Both the importer and the CHA confirmed that they had filed the bills of entry at that time when they were not aware of any offences being committed in regard to such importation. At this stage M/s. J.B. Trading Corporation filed bills of entry for the same goods claiming that the suppliers had transferred the goods to them. They were in possession of fresh bills of lading, invoices etc. in their name. They also had the requisite licences. They had filed bill of entry in terms of Section 46 of the Act. M/s. J.B. Trading Corporation filed writ petitions before the Madras High Court for directions to be made to the Customs to process the bills of entry and to permit them to clear the goods on payment of duty. The High Court held as follows :
"In my considered view, as rightly contended by the learned Senior Standing Counsel for the Central Government, the words, namely, 'at any time between their importation and the time when they are cleared for home consumption' occurring in Section 2(26) are important. It has already been noted that the goods had arrived on 27-9-1986 on which date the importation had become complete having crossed the customs barrier. At that relevant time it was only M/s. Continental Silk House which was the importer and for that alone the goods were intended. As a matter of fact, the bills of entry had been filed by M/s. Jeena & Co. They still stand. Those bills have not been cancelled; nor the imported goods were abandoned. In law, therefore, no other person can claim to be the importer of the goods except the person shown in the Manifest originally as seen from the above Tabular Statement against Line Nos. 150, 151 and 152. After the completion of importation on 27-9-1986, there cannot be another importer for the very same goods."
23. This judgment was followed by the Tribunal in the case of Biren Shah v. Collector of Customs, Bombay [1994 (72) E.L.T. 660 (Tribunal)]. The appellant had caused goods to be imported in the name of M/s. Vikram Overseas who were holders of a pass books. Bills of entry were filed by M/s. Vikram Overseas. But later they had refused to clear the goods. Biren Shah claimed that he was the real person importing the goods. The suppliers had offered to transfer the documents in his name and that he should be allowed to file the bill of entry. The department refused the request, confiscated the goods and auctioned the same. Before the Tribunal it was claimed that in the face of the developments where Biren Shah claimed to be the importer, and also held the documents, he should be treated as a importer in terms of Section 2(26). The Tribunal held as follows :
10.2. "No doubt, Section 2(26) permits anyone holding himself out to be the importer between the date of importation and clearance of the goods. But here, M/s. Vikram Overseas, in whose name the goods have been manifested, have by filing a Bill of Entry on 21-11-1990, already held themselves out to be the importer. There is no dispute that the goods have come in their name and as on date, the manifest has not been amended. They have also filed the Bill of Entry for their clearance. If they have disclaimed the goods and returned the documents, it is for the suppliers to claim reshipment of the goods, because they only can claim title to the goods being the owner of the goods. They could not have transferred the documents in favour of Shri Biren Shah, without ensuring that Shri Biren Shah could legally clear the goods by retiring the documents to make payment for the goods. If they have transferred the documents, presumably they appear to have done it on the persuasion of Shri Biren Shah. However, we could not on our own go into the merits of the bona fide nature of the claim made by M/s. Conquest Japan) for re-shipment in the absence of any appeal from them. Hence, we would not like to express any opinion on the said claim for reshipment. All the same, merely because the suppliers have the right to call back the goods and they have re-transferred the documents in favour of Shri Biren Shah, it cannot justify Shri Biren Shah to be construed an 'importer' under Section 2(26) of the Customs Act. Because M/s. Vikram Overseas have already held themselves out to be importers by filing the B/E along with requisite declaration for clearance against their pass book. Their backing out is only on account of the detection of the illegal design for selling the imported duty free materials. Though, M/s. Vikram Overseas disclaimed the goods in their early letters, in their letter dated 4-4-1991 waiving show cause notice, they sought for release of the goods to them on payment of duty and penalty. This indicates that they continued to have an idea of clearing the goods at the time of adjudication by paying duty and penalty. But they have not perused their claim for redemption of the goods on payment of duty and fine before us. In such circumstances, we are to consider only the claim of Shri Biren Shah for treating him to be the importer. We cannot persuade ourselves to accept him either as a person, who held out as an importer by getting the documents in his name at the time of arrival of the goods. M/s. Vikram Overseas only have filed the B/E and held themselves out to be the importer. If they disclaimed the goods, the Department cannot substitute another person as importer, in the context of the provisions of Sec. 48 of the Customs Act, whereunder if the notified importer does not clear the goods or abandon the goods, the authorities having custody of the goods can only sell the goods by auction and the law does not permit substitution of another importer. Be that as it may, in a case where a fraud has been detected in the import, the name of the importer cannot be changed in the manifest and any such amendment is not permissible under Section 30(3) of the Customs Act."
24. The position of Shri V.K. Gandhi is altogether different and in fact much stronger. At no stage did he claim to be an importer. Therefore the attempt of the Revenue to foist the title of an importer upon him and to label the payment made by him as "duty" must fail.
25. Section 27 of the Act, names the following "persons" as capable of seeking refund of any duty :-
(i) paid by him in pursuance of an order in assessment; or
(ii) borne by him.
The first part refers to an importer, and the second refers to a buyer. Shri Gandhi is neither. Therefore the claim of the Revenue that the Commissioner had erred in disregarding the dictates of this Section has no relevance or merit.
26. As regards Shri A.B. Timbadia, the Member (Judicial) in para 11 above has given complete reasoning for dismissal of the stay application.
27. Concurring with the findings of the Member (Judicial) the stay applications against V.K. Gandhi & A.B. Timbadia are dismissed.