R. Jayaraman, Member (T)
1. All the three appeals listed above are against the common order-in-original No. 33/92 dt. 26-8-1992 passed by the Collector of Customs (Prev.), Bombay.
2. In the said order, the Collector has ordered absolute confiscation of a consignment of 75 cartons of staple pins valued at Rs. 76,121/- (CIF) under Section 111(d) of the Customs Act. He has also imposed varying penalties on five parties, including inter alia the three appellants before us. The other two parties do not appear to have filed appeals before us. In so far as the three appellants before us are concerned, the Collector has imposed the penalties as below :-
(i) Shri Biren Shah-Director of M/s. Audio Rs. 50,000/- Visual Devices (P) Ltd. (Appeal No. 631/92-Bom.)
(ii) Shri Mahendra Sheth, Partner of Sunil Rs. 20,000/- Shipping Agency, CHA (Appeal
(iii) Shri Kishore Bhagat (Appeal No. Rs. 20,000/- C/632/92-Bom.)
3. Shri Biren Shah, has prayed for the following reliefs :-
(i) to set aside the order imposing penalty on him, (ii) to set aside the order of absolute confiscation of the goods, (iii) to order clearance of the goods on payment of applicable duty against any valid licence without any fine and penalty, (iv) alternatively to allow redemption of goods on payment of reasonable fine in lieu of confiscation if the prayer for release without fine is not agreed to.
The other two appellants have only challenged the penalties imposed on them.
4.1 The facts of the case can be briefly stated as under. On the basis of information, on 29-12-1990, the officers of Marine and Preventive Wing of Bombay Customs (Preventive) Collectorate searched the room at Welcome Hotel, Bombay, which was occupied by one M.D. Pallaria. During the search, large number of incriminating documents showing trafficking of goods imported duty free under Import Export Pass books issued to various manufacturers Exporters/Export Houses, were recovered. Thereafter statements of M.D. Pallaria were recorded on various dates 29-12-1990, 2-1-1991, 3-1-1991, 4-1-1991 and 6-3-1991. In the various statements, Shri Pallaria has indicated that he is the Director of M/s. Giriraj Impex (P) Ltd. and the said firm deals with exporter/manufacturers, who are interested in getting import export pass book and they were arranging to get such pass books on charging 10% towards services charges and accordingly the firm had arranged pass books for 15-16 companies and one such company named by him is M/s. Vikram Overseas, New Delhi (who have filed the Bill of Entry for the consignment of staple pins covered by the appeal and appended declaration for clearing the goods under the pass book duty free). Shri Pallaria has also admitted that he sells the pass books so obtained in the names of the various parties, to the various traders, depending on the items needed by them as covered by the pass books. He also explained the details of the imports already effected and cleared against various pass books and explained the mode of clearance and payments to be made to the various parties involved. He also explained the contents of various documents seized from him in the hotel room. From these documents read alongwith the explanation given by Shri Pallaria, it appeared to the authorities that many consignments imported in the name of M/s. Vikram Overseas against their pass book have been diverted by way of sale in the market. Shri Pallaria also revealed that Shri Biren Shah (appellant in C/631/92) is also one of his customers, who has purchased the pass book of Vikram Overseas on premium. The mode of clearance as revealed by him was to arrange filing Bill of Entry in the name of the pass book holder but the goods were ordered by Shri Biren Shah from foreign supplier and documents drawn in the name of the pass book holder but money will be paid through pass book holder. We are now concerned with one such transaction, where Bill of Entry has been filed for clearance of a consignment of 75 cartons of staple pins by M/s. Vikram Overseas, which has not been allowed clearance but ordered absolute confiscation. Shri Biren Shah also does not dispute that he purchased the pass book on premium with an understanding to get the goods delivered to him after clearance. He also does not dispute that the order with Japanese supplier was placed by him for supply to be effected in the name of Vikram Overseas. But the trouble arose for him because M/s. Vikram Overseas, after the commencement of investigation have refused to clear the goods, and did not retire the documents by giving the reason as "not ordered" by them. Hence, Shri Shah pleaded with the Customs authorities that since the goods were ordered by him in the name of Vikram Overseas, the foreign suppliers have written to them that they will redraw the documents in his (Biren Shah's) name. Accordingly he has got the documents in his name. He should be permitted to file the Bill of Entry and clear the goods on payment of duty applicable to the goods. However, this request was not accepted. In the adjudication proceedings held by the Collector, the goods were absolutely confiscated and Shri Pallaria, Vikram Overseas, Shri Biren Shah, Mahendra Sheth (CHA) and Kishore Bhagat were imposed penalties by the Collector. The Collector also rejected the claim for reshipment made by the suppliers.
4.2 In so far as the appellants Mahendra Sheth and Kishore Bhagat are concerned, their alleged role is actively conniving with S/Shri Pallaria and Biren Shah in their trafficking of goods imported free of duty under Import-Export Pass Book Scheme. They are imposed penalties under Section 112(a)(ii) of the Customs Act.
5. During the hearing of stay applications, it was brought to our notice that Shri Biren Shah went upto the Supreme Court for restraining the Department from auctioning the goods ordered absolute confiscation in this case. The Supreme Court have disposed of their prayer by directing them to approach the Tribunal for any interim order. It is also revealed by the Department that these goods have been already auctioned and bid accepted, but delivery not effected because of this restraint. Since both the sides were keen to have the final decision, we have taken up the appeals on priority basis, instead of passing an interim order.
6. After hearing both the sides, we find that in regard to appeal No. 631/92 filed by Shri Biren Shah, the following facts are not disputed.
(i) Bill of Entry alongwith declaration for clearance of the consignment against import-export passbook under Notn. 2/86-Cus. was filed by M/s. Vikram Overseas alongwith the invoice for the consignment in the name of Vikram Overseas. This is also found in the file produced by Shri Mondal, the ld. SDR.
(ii) The manifest for this consignment is in the name of M/s. Vikram Overseas, New Delhi as consignee.
(iii) The Bill of Entry has been filed on 21-11-1990 by M/s. Sunil Shipping Agency (CHA), on behalf of M/s. Vikram Overseas, New Delhi.
(iv) Shri Pallaria in his various statements inter alia indicated that the goods imported in the name of Vikram Overseas against Import-Export Pass Book were sold to various traders and one amongst them is Shri Biren Shah. Even in regard to this consignment, it was only Shri Biren Shah, who placed orders with Japanese suppliers in the name of Vikram Overseas and arranged to file Bill of Entry in the name of M/s. Vikram Overseas, through Shri Kishore Bhagat. This position is not only confirmed in the statements of Shri Biren Shah but also specifically admitted in his independent letters dated 13-1-1991 and 14-2-1991. In the letter of 14-2-1991 written by M/s. Audio Visual Devices of which Shri Biren Shah is the Director, it is specifically admitted that they placed orders with the suppliers with the directions to supply the goods in the name of M/s. Vikram Overseas for which they had agreed and arranged the payment of the goods and also the premium on receipt of the goods.
(v) In an earlier letter dt. 13-1-1991, they have specifically referred to the consignment imported against M/s. Vikram Overseas and sought for permission to file Bill of Entry and clear the goods on payment of duty. The ground urged for this request is that suppliers are pressing hard to make the payment, since the goods were ordered by Biren Shah and M/s. Vikram Overseas have not retired the documents, since they have not ordered for the goods.
(vi) As seen from the letter of Shri Biren Shah dt. 14-1-1991, he has indicated the goods imported tinder Import-Export Pass Book Ref. No. 90/659-A dt. 28/9 of M/s. Conquest (Japan) Inc. for import of 75 cartons of staple pins as the subject matter of his letter. In the said letter, he has agreed that there has been a contravention of Import Policy and the provisions of the Customs Act. He agrees to pay duty on the goods seized by the Department and clear the goods. No mention is made about the goods being covered by any licence held by him. His request is only for allowing clearance of the goods by him on payment of duty.
(vii) The factual position as revealed by Shri Pallaria and Biren Shah indicating that the arrangement was to get the goods cleared in the name of M/s. Vikram Overseas by financing the entire import by Shri Biren Shah from behind and also paying premium for import-export pass book and getting the goods so cleared by Shri Biren Shah for ultimate sale is not disputed.
(viii) This arrangement has however failed in this case. Because M/s. Vikram Overseas have by their letter dt. 28-3-1991 addressed to the Addl. Collector of Customs that they are not claiming the goods, since 75 cartons of staple pins were not ordered by them.
(ix) This letter dated 28-3-1991 is after issue of summons to them for producing the various documents connected with the import (Initially they sent a telex reply indicating their inability to respond to summons because their Managing Director was hospitalised and thereafter sent the above letter dt. 28-3-1991). Subsequent to their letter dt. 28-3-1991, M/s. Vikram Overseas in their letter dt. 4-4-1991 addressed to the Assistant Collector of Customs (Prev.), Bombay, requested to release the goods on payment of duty and penalty and waived the show cause notice.
7. In the context of the above position, which is evident from the records, and which is not challenged before us on factual accuracy, we now consider the arguments of Dr. Kantawala on behalf of Shri Biren Shah.
8. The main thrust of the argument of Dr. Kantawala, the Ld. Advocate can be indicated as below :
(i) As per the definition of "importer" under Section 2(26) of the Customs Act, 'importer' in relation to any goods at any time between the importation and the time, when they are cleared for home consumption, includes any owner or any person holding himself out to be the importer. Here, though Bill of Entry has been filed by M/s. Vikram Overseas and noted, since Shri Biren Shah has placed the order for the goods and the supplier have transferred the documents to him on account of failure on the part of M/s. Vikram Overseas to retire the document, Shri Biren Shah could hold himself out to be the importer for clearance of the goods.
(ii) Though no offer for production of other valid licence was made before adjudicating authority, Shri Biren Shah can now produce valid REP licence and if the matter is remanded, the licence can be examined by the authorities for acceptance and goods cleared on payment of duty.
(iii) M/s. Vikram Overseas having disclaimed the goods and the supplier having transferred the documents in Shri Biren Shah's name, he should have been permitted to file the Bill of Entry and clear the goods. Since the goods are yet to be cleared and they were disclaimed by M/s. Vikram Overseas Shri Biren Shah holding documents for the goods transferred in his name, can hold himself out to be the importer.
(iv) Even though goods were sought to be cleared duty free under Import-Export pass book Shri Biren Shah is willing to pay duty and also provide valid REP licence. Hence he would plead for remand so that the licence held by him can be considered for acceptance and clearance allowed on payment of duty in which case no penalty can be sustained.
(v) In the alternative, he would plead for allowing redemption of goods to Shri Biren Shah on payment of reasonable redemption fine, since the goods are not banned for import and they are not in the negative list.
(vi) He also pleaded that the Steamer Agents would have moved an amendment for the manifest, but according to his knowledge no such amendments were permitted to be made on account of instructions from the Preventive Collectorate in this case.
9. Shri KM Mondal, the ld. SDR, submitted that the undisputed position is that the imports were made in the name of M/s. Vikram Overseas to clear the goods duty free against the pass book fraudulently, where pass books have been sold on premium. When the fraud was detected, M/s. Vikram Overseas have disclaimed the goods and Shri Biren Shah tries to retrieve the goods imported with the fraudulent purpose, by claiming himself to be the importer. Section 2(26) of the Customs Act, as interpreted by the Madras High Court in the case of J.B. Trading Co. - 1990 (45) E.L.T. 9 (Mad.) rules out substitution of an importer, against whom Bill of Entry has been filed, by another where a case has already been registered. Even amendment of manifest is permissible, only where no fraudulent intention is discernible [vide Section 30(3) of the Customs Act]. Hence Shri Biren Shah cannot be treated as an importer either for release of the goods or even for allowing redemption of goods on fine. When there is no whisper about having possession of valid REP licences by the appellant at any time before adjudicating authority, his present request only shows that he has since managed to get some transferable licences with back dated transfer letter. Hence such a request cannot be permitted. In the absence of any appeal from M/s. Vikram Overseas for allowing redemption, the request of Shri Biren Shah claiming himself to be importer of goods for allowing redemption cannot be legally sustained. Hence order of absolute confiscation does not warrant any modification. Since Shri Biren Shah has knowingly engaged himself in purchasing Import-Export pass book on premium mainly with a view to get the goods for himself to make a profit availing duty benefit, penalty is well justified and the quantum of penalty is also reasonable. He would therefore plead for dismissing the appeal of Shri Biren Shah in toto.
10.1 Considering the above arguments from both the sides, we find that there is no serious challenge to the factual position recorded in Para 6(i) to (ix) above. This clearly indicates that as per a prior arrangement Shri Biren Shah purchased the pass book at a premium and placed orders with the foreign supplier for shipping the goods in the name of M/s. Vikram Overseas. As per the arrangement, Vikram Overseas also filed the Bill of Entry on 21-11-1990 along with a declaration for clearance against pass book awaiting exemption under Notification 2/86-Cus. Bill of Entry was caused to be filed by Shri Biren Shah through Shri Kishor Bhagat using the C.H.A. M/s. Sunil Shipping Agency. In the normal course, on production of the pass book in the name of Vikram Overseas sold on premium to Biren Shah, the goods would have been cleared free of duty and come in the hands of Shri Biren Shah. But the officers of Customs, acting on information carried out a raid in the hotel room occupied by Shri Pallaria on 29-12-1990 and recovered various incriminating documents. They also recorded the statements of S/Shri Pallaria and Biren Shah. In these investigations, the subject consignment is also figuring. Hence, alerted by the investigation, M/s. Vikram Overseas, instead of responding to summons, disclaimed the goods initially, but in the letter dated 4-4-1991, they waived the Show Cause Notice and pleaded that the pass book was handed over to late Shri Jain, who was managing the imports and hence not able to furnish any details. They have requested for release of the goods on payment of duty and penalty. They have not come before us challenging the order of absolute confiscation and pleading for redemption of goods. It is only Shri Biren Shah, who seeks for this relief before us and seems to have gone upto the Supreme Court. Hence we are to consider whether he has the status of an importer to make such a claim under the Customs Act. We propose to consider this, independent of the citation made by the Ld. SDR.
10.2 No doubt, Section 2(26) permits any one 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 persuation 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 reshipment 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 retransferred 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 pursued 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 Section 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.
10.3 Moreover, if he had a licence to clear, it should have been revealed to the adjudicating authority. There is no whisper of any licence held by him during adjudication proceedings. For any item (other than absolutely banned items), some transferable licences will be floating around in the country. If such request for remand on plea of production of licence at the appeal stage is entertained, frauds will be perpetuated by getting such licences with back dated letters of transfer. Policy contemplates shipment to be effected under valid licence on the date of shipment. Here it is reportedly effected by M/s. Vikram Overseas and substituting some licences sought to be produced at the appeal stage in the place of pass book does not arise and such a request has to be rejected outright. Moreover, in view of our findings that Shri Biren Shah cannot be held to be the importer by any standards under the Customs Act, this request even otherwise does not call for consideration.
10.4 On the question of amendment of manifest not being permitted by the Department, we are to look into the provisions of Section 30 of the Customs Act. As per this section, amendment to the manifest can be moved only by the master or the Agent, who have filed the manifest. Section 30(3) clearly envisages that only if the proper officer is satisfied that there was no fraudulent intention, he may permit the amendment. Here the undisputed factual position is that the goods were sought to be imported in the name of M/s. Vikram Overseas solely for duty benefit and the amendment is sought to be moved for substituting Vikram Overseas by Shri Biren Shah, when the fraud was detected. Hence the officer is well within the provision of Section 30(3) of the Customs Act to reject the request for amendment, even if it had been moved by the Steamer Agent, as claimed by Dr. Kantawala, without producing any evidence in that regard supporting his claim.
10.5 Now we look into the case law - J.B. Trading Corpn. v. U.O.I. -1990 (45) E.L.T. 9 (Mad.); we find the facts are similar; not identical. Section 2(26) has been interpreted in the same manner, as we have held now. Particularly, we would like to reproduce certain observations of Hon'ble Madras High Court for supporting the view taken by us :-
"If the contention of the petitioner is to be accepted, whenever any consignment is liable for confiscation for some violation, the importer could be substituted by some other person to file the bill of entry for clearance. It is almost certain that having come to know of the proceeding, the petitioner, with a view to circumvent the same, is claiming itself as "importer" in order to set at naught the adjudication proceedings and the confiscation of goods. It is rather surprising that when the petitioner has accepted that its payment is against S/P, basis, instead of refusing to retire the document, it is making ingenious attempts to clear the goods which have been illegally imported into India by a fictitious firm on the strength of forged documents concerning which R.C. No. 19 of 1986 is pending. There is absolutely no scope for the petitioner to claim the right of an 'importer', more so, after the first information report came to be filed on 2-12-1986 while the invoices of the petitioner bear the dates 15-12-1986 and 6-12-1986. Fraud is infinite in its variety and this is one such variety."
The above observation of the Hon'ble High Court apply to the facts of this case squarely, because here also the attempt is to retrieve the goods after booking of a case by substituting one importer by another. Hence we reject the prayer of Shri Biren Shah either for release of the goods, on payment of duty accepting some valid licence or for allowing redemption of the goods on payment of fine. In other words, order of absolute confiscation stands and the Department is at liberty to dispose of the goods ordered absolute confiscation in accordance with law.
10.6 Now coming to penal liability on Shri Biren Shah, on the basis of the admitted factual position, he has knowingly engaged himself in purchasing duty free materials by acquiring the pass book on a premium, which cannot be transferred as per the policy, he is liable to penalty. However, considering the value of the goods involved, we extend some leniency and reduce the penalty to Rs. 25,000/- (Rupees Twenty five thousand only). His appeal is otherwise rejected.
11. Now, coming to appeals filed by Shri Kishore Bhagat (C/632/92) and by Shri Mahendra Sheth (C/633/92-Bom), their appeals are against penalties of Rs. 20,000/- imposed on each of them. Their alleged role is clearance of the goods imported duty free, which were actually not meant for the pass book holder but for Shri Biren Shah and other purchasers of goods. Both of them waived show cause notice and personal hearing. We heard the arguments from both the sides. We find that the findings of the Collector are cryptic and do not discuss the evidences against these individuals with regard to the act of omission or commission on their part rendering themselves liable to penalty. These are now agitated before us by the appellants. It is also not clear from his findings whether the penalties imposed are with regard to their involvement in previous clearances or in regard to the present consignment and whether they are privy to any conspiracy. In view of this, we could not go into the merits of the arguments from either side. Moreover, even if a show cause notice is waived, it is necessary as per the provisions of Section 124 of the Customs Act, that such a notice has to be oral. Hence it is necessary to record the specific allegations which were put across to the appellants orally and hear them on these allegations. Hence in the absence of specific allegation being mentioned and in the absence of discussion of evidences against each of them by the adjudicating authority we would deem it proper to remand both the cases for de novo consideration by the Collector, preferably after issue of a show cause notice or after giving a hearing, where charges and supporting evidences can be specifically spelt out to the appellants orally (recorded in the order) and after considering their representation may pass orders in accordance with law. Both the Appeal Nos. C/632/92 and 633/92-Bom. are allowed by way of remand.