2018 (1) TMI 225 - CESTAT MUMBAI

Misdeclaration of description and value of imported goods - modems - automated teller machines - automated teller machine processors - Levy of penalty on the persons who were concerned in any manner with the handling of goods that were liable for confiscation or had, in any way, dealt with such goods.

Held that: - The contractors for supply to M/s Philips India were firms/companies being controlled and operated by Shri JP Mody and Shri Suketu J Mody. M/s Philips India and S/Shri V Ramamrutham and K Basu of Philips India admitted to having discussed the procurement routes with Shri JP Mody and Shri Suketu J Mody and they placed purchase orders on entities that did not have a factory for manufacture of these goods; nor were they able to furnish any evidence of compliance with Central Excise formalities. There was no transfer of technology from M/s Diebold, USA or M/s Philips Holland/ Jarfalla to these purported manufacturers.

The Export Import Policy of the time had restricted the import of these goods to actual users qualified to be issued with special import licence. Likewise, parts could be imported for manufacture under restricted conditions. Admittedly, the imports were effected without such a licence entailing liability to confiscation of goods under section 111 of Customs Act, 1962. With that, penalties under section 112 of Customs Act, 1962 would have to be visited upon those who were concerned in any manner with the handling of goods that were liable for confiscation or had, in any way, dealt with such goods.

Today, ‘automated teller machines’ are commonplace and literally accessible to all at street corners but this was not so at the time of the impugned imports. ‘Processors’ and ‘modems’ were unheard of outside the tiny world of specialized engineers; today, every child is familiar with these and these are available across the counter. Not unnaturally, because the internet and worldwide web were part of techspeak and not of the lingua franca. In the context of goods under import, it is even less surprising that severe restrictions existed on manufacture and import. The Industries (Development & Regulation) Act, 1951 that controlled the command economy did not accord any priority for allocation of resources for manufacture of such luxury equipment. Imports of parts for manufacture of such luxury goods would have deprived priority areas of scarce foreign exchange; hence, these non-tariff barrier. Again, it is not surprising that ‘automated teller machines’ could be imported only by actual users against licences. That facility was for the limited few and for customers of a few banks who were permitted to operate in India under strict and circumscribed conditions, including that of branch expansion, specified licence issued by the banking regulator.

There is nothing on record to demonstrate that M/s Hongkong & Shanghai Banking Corporation Ltd were eligible to procure ‘automated teller machines’; at the same time, their global policy envisaged such a facility for their customers. The sole alternative was to procure them from local manufacturers. In the narrated circumstances of the restricted import and operational regime, nothing has been adduced by them to establish that they were unaware of the source of the goods that were ultimately to be installed in their premises and, hence, have them excluded from the purview of coverage under section 112 of Customs Act, 1962. There is a specific finding in the impugned order which, for overcoming, would have to be controverted other than by protestation of innocence - Owing to lack of any credible justification, there is no reason to exclude M/s Hongkong & Shanghai Banking Corporation Ltd from the ambit of the penal provision.

As far as M/s Philips India Ltd is concerned, they were the suppliers of the equipment to M/s Hongkong & Shanghai Banking Corporation purported to have been manufactured in India. They were not unaware of the exclusive source through which these products could have been vended - The subterfuge established in proceedings against the importer was conceived to overcome the imperatives of that regime and, having thus been connected to the impugned goods, M/s Philips India Ltd cannot be excluded from coverage under the penal provisions.

S/shri V Ramamritham, K Basu and AA Ansari were employees of their respective organisations. There is no evidence on record that they stood to benefit from the subterfuge other than by continuance of their source of livelihood - Nevertheless, they are not beneficiaries. We feel that the ends of justice would warrant the setting aside the penalties against them. The appeals of these individuals are allowed.

Appeal disposed off.