TMI Blog2009 (9) TMI 156X X X X Extracts X X X X X X X X Extracts X X X X ..... it, agreed with by Third Member – Pre-deposit directed – However, bank not being party to mis-declartion, entitled to waiver of pre-deposit of penalty – Indian subsidiary of foreign supplier prima facie liable to penalty as entire conspiracy was hatched to overcome import restrictions – but penalty cannot be imposed on company u/s 112(b) of Customs Act, 1962 – since destruction of documents not contested in writ appeal and hence plea on violation of natural justice not acceptable - C/318-319, 349-364 and 708-710 - S/374-394/2009-WZB/C-II/(CSTB) - Dated:- 8-9-2009 - S/Shri M.V. Ravindran, Member (J) and K.K. Agarwal, Member (T) Third Member on Reference : Shri P.G. Chacko, Member (J) Final Order per : S/Shri P.G. Chacko, Member (J) and A.K. Srivastava, Member (T) S/Shri V.S. Nankani, D.B. Shroff and Anil Balani, Advocates and S.S. Sekhon, Consultant, for the Appellant. Shri B.K. Singh, Jt. CDR, for the Respondent. [Order per: M.V. Ravindran, Member (J)]. - All these stay petitions are directed against the order-in-original No. CAO No. 155/2007/CAC/CC/KS, 156 157/2007/CAC/CC/KS dated 27-12-2007 vide which the adjudicating authority has passed the order, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e adjudicating authority came to the conclusion that the ATMs and terminal computers, which were imported were full machines as such, and there being mis-declaration came to the conclusion that there is a misdeclaration in respect of the modems imported by the importers. After coming to such conclusion, he ordered for the confiscation of the said goods with an option to redeem the same on payment of redemption fine, confirmed the demand of Customs duty, and imposed penalties under Section 112 of the Customs Act, on all the applicants. Hence, these stay petitions for waiver of the pre-deposit of the amounts. 3. Ld. Counsel appearing on behalf of the applicant Hindustan Engineering Corporation submits that the question of importing ATM, in CKD condition does not arise. It is his submission that the charge of importing ATMs in CKD condition is on three parties. While the confirmation of demand of duty is against only this applicant i.e. Hindustan Engineering Corporation. It is his submission that the goods, which were imported by the applicant cannot be considered as the ATMs in CKD condition as the items, which were imported could not have been assembled into an ATM. It is his subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... required for him for defending the case. It is the submission that examination report will indicate that the importer declared the goods as components/parts, which on inspection were found to be so by the examining authorities. He submits that the examination report would indicate whether the importer had imported only the parts or the entire ATM. He submits that the adjudicating authority has also not given cross examination of the witnesses and officers to defend his case. It is his submission that they have been writing various letters to the authorities to give the copies of the bills of entry along with examination report and the said letters have not even evoked any response from the adjudicating authority. 5. Shri DB Shroff, Advocate appearing on behalf of the applicant HSBC submits that they had agreed for purchase of 10 ATMs from M/s. Peico Electronics Electricals Ltd. Ld. Counsel draws our attention to the entire order-in-original and submits that the show cause notice has been issued to them for aiding and abetting the illegal imports made by one Shri J.P. Mody of J.P. Group without even considering the facts that none of the officers of HSBC were called for recordi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r employees submits that the adjudicating authority has imposed penalty under Section 112 of the Customs Act on all the applicants. It is his submission that the said imposition of penalty is unwarranted for and submits that the entire adjudication order imposing penalty is passed in violation of principles of natural justice. It is his submission that the applicants had sought the cross examination of the appraising officer, CHA and had sought the copies of the bills of entry, which were in the possession of the revenue. It is his submission that these bills of entry are vital evidence in order to defend the case before the authorities as the bills of entry records the examination report, which indicated the examination done by the officers while clearing the consignments. It is his submission that when the consignments were cleared by the officers, there was no dispute and they were considered as parts of ATM/modem and not complete machines. He reads the parts of the order-in-original and submits that the entire activity of assembling ATM was done in India. It is his submission that there are no findings as to the prohibition of imports of parts. It is his submission that the CKD ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ATM. It is his submission that the said supplier had categorically stated that the bills were only issued by them without any activity. It is his submission that applicant M/s. HSBC has accepted the different description on the invoice on the ATM and terminal computer, would itself would indicate that they were aiding and abetting to evasion of customs duty. It is his submission that the applicant Shri A.A. Ansari signed the bills of entry during the relevant period and, hence, he cannot escape from the penalty under Section 112(a) as he was the person, who had visited the foreign country, segregated and repacked the consignments. As regards the penalty imposed on M/s. Peico Electronics Electricals Ltd., and their employees, it is his submission that the said M/s. Peico Electronics Electricals Ltd., had received the order for ATM and modems from HSBC and Citi Bank, they were aware that for import of ATM, specific import licence is required, hence, in order to by pass the condition put in the import and export policy, they involved J.P. Mody to bring the goods as parts and subsequently supplied ATM as being assembled in India. It is his submission that M/s. Peico Electronics ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of import documents, inspection of seized goods and cross examination of witnesses whose statements were being relied against them. It is department's case that the documents were destroyed in 1998, however these exists no tenable reason as to why copies of the documents were not provided when show cause notice was issued in 1992 and since then the appellant was consistently seeking copies thereof. If the documents are destroyed, it is also needs probed why documents were destroyed, when admittedly Shri J.P. Mody was litigating the issue in Hon'ble High Court. To our mind, if any of these documents or the files concerned with the subject importation are still in the possession of the department cannot be denied, as we are of the opinion that the issue needs to be looked in to from the factual matrix whether the import documents and the examination report appended thereto, indicates import of those parts and components which are nothing but complete ATMs in CKD condition. Non-supply of these documents without any justifiable reason is violation of natural justice as is held by Hon'ble High Court of Bombay in the case of Kellog India Pvt. Ltd. - 2006 (193) E.L.T. 385 (Bom.) = 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 17. In view of the foregoing reasoning it is seen that there is violation of natural justice while passing the impugned order. It is settled law that when the case made out in the show cause notice is based on statements; the noticees must be provided opportunity to test the veracity of the statements on the anvil of examination. There is infirmity in the order in as much that it has not considered the total submissions made by the noticees. It is settled law that any order that is passed in violation of principles of natural justice is void-ab-initio. 18. Without expressing any opinion on the merits of the case and keeping all the issues open, we set aside the impugned orders and remit the matter back to the adjudicating authority to reconsider the issue, in accordance with law after: (i) Providing documents/files (ii) Cross-examination of persons as was sought by the appellant, (iii) Thereafter providing a sufficient opportunity to submit complete defense, (iv) Granting a personal hearing. (v) Considering the issue of modems in the light of settled law as regards their classification. 19. Since the issue is of 1988, needless to say that all the appellants will co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Germany, France etc. to a nominated party viz. M/s. Exportek Belgium. In Belgium, these machines were split into 4 parts wherein the main machine was packed in a wooden case and the other parts were packed in 3 different cartons by one Shri Ansari, a mechanic in the employment of Shri Mody's company who was sent specially for this purpose to Belgium. These machines in split consignments were invoiced by Exportek to the companies of Shri Mody like Hindustan Engineering, Suku Computers etc. in India with changed description and with very low value to India. Investigations revealed that with a view to provide a cover up to this modus of misdeclaration and smuggling of ATMs and ATMPs, Mr. Mody showed their acquisition and procurement in India against bogus bills of various firms such as M/s. Welfab Engineers, M/s. Mutha Steel Alloy etc. 24. Out of 43 ATMs and 18 ATMPs, M/s. Philips India sold 15 ATMs and 9 ATMP to Citibank, 28 ATM and 9 ATMPS to HSBC bank. These were found installed at different sites of these banks. These machines totally valued at Rs. 8,66,86,879/- were seized and provisionally released pending adjudication to the two banks viz. Citibank and HSBC bank. 25. Stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the companies possess manufacturing licence or the technology for manufacture of ATMs. It was admitted by Welfab and Mutha Steel that they did not supply any goods or machines against their bills and that Mutha Steel was stockist and manufacturer in MS rod, steel pipes, alloy steel, hardware, etc. and has no knowledge of ATM machines nor had any industrial licence or registration for manufacture of such sophisticated high technology machines, nor were they registered with the Central Excise. No evidence of payment of CE duty was ever produced. 28. Shri Banerjee, GM Philips India, in his statement admitted that they could not import the ATMs directly due to licence restriction and entered into an agreement with Mody who agreed to import these ATMs and controllers from Philips Holland. On pricing he stated that they have worked out the CIF prices of the ATM in Dutch Guilders to Shri Mody who was asked to quote his price in Indian Rupees. Shri Mody arrived at a formula which after negotiation was fixed at 2.9 times of the CIF value and this price included the customs duty and licence premium, if any. He confirmed having supplied 28 ATMs and 9 controllers to HSBC as also 15 ATMs and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at all but have only tried to seek shelter on the fact that the department failed to supply them the original copies of Bills of entry which contained the examination order, and once the goods have been examined and found to tally with the description in the bills of entry, the benefit of doubt should be given to them regarding the actual imports made by them. This fact I may mention, has been agitated by the appellants before the Hon'ble High Court also but the High Court has ordered to adjudicate the case on the basis of available records. Shri Mody wants us to ignore the entire evidence against him in the form of statement of the officers of Philips India, Philips Holland, the supplier of the ATMs, Shri Mody himself, Shri Ansari and the local companies supposed to have delivered the ATMs denying that any parts were either manufactured or that the imported parts were assembled by them to form a ATM. It is quite noteworthy that Shri Mody and the other noticees have not asked for the cross examination of any of these persons which conclusively proves that entire ATMs were imported and supplied. Shri Mody could not spell out the specific items which were imported and the items whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the original copies of the bill of entry containing the examination order. The appellant's case is that the goods were correctly declared by them in the bill of entry which description was examined by the customs officers and was found to be correct and therefore charge of misdeclaration cannot be upheld. I feel that even if it is accepted that the goods were found on examination as parts, the revenue's case is not that what was imported were not parts but it is the case of the revenue that a complete ATM was split deliberately and sent in separate packing and these parts together form a complete ATM which fact could never have been established by examination of the consignment which was imported after splitting the machinery. The import of ATM was totally new at that time. No officer could have found that these parts together would form a complete ATM as installation of ATM etc. requires technical expertise. For that purposes, cross examination of any officer would have been of no help as even if it is admitted that what was imported were parts, the allegation is that these parts together constituted a full ATM or a mode in the other appeal. There is incontrovertible evidence with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the import policy the liability to pay the duty lies on the original importer. It is only in the case of violation of post import conditions, that a person claiming to be the owner of the goods is liable to pay both fine and duty, if not already paid, as held by the Bombay High Court in the case of Wockhardt Hospital in 2006 (200) E.L.T. 15 (Bom). The Hon'ble Supreme Court in the case of Jain Shudh Vanaspati reported in 1996 (86) E.L.T. 460 (S.C.) has held that in case of misdescription and misdeclaration of value duty, can be demanded under Section 28 of the Customs Act. The other plea is that while the imports have been affected i.e. from HEC, Suku Computers and Suku Digitals the duty has been demanded only from HEC which is not correct as duty can be demanded from the company which has actually imported. I find this is a case where fraud has been committed and the sole perpetuator of the fraud was one Shri J.P. Mody who controlled all the group companies, as has been admitted by him in his various pleadings and his statements made before the court where he has been filing writ petitions on behalf of all the companies. In fact, even before this bench, he was pleading on behalf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsidered the plea of Shri Nankani and I find that this was a case of a fraud played on revenue to overcome restrictions of the policy and for undervaluation of the goods. In fact, undervaluation has been conceded by Shri Nankani when he states that full CIF value has been realised by them and it has come on record that the price declared by the three companies on whose name imports were made have declared price less than CIF value. Further, in the case of Phoenix the imports were made in the name of 2 companies, whereas in the present case the imports were in the name of one company only for a particular no. of ATMs. Therefore the decision of the SC in the case of Phoenix shall prevail along with Essar Oil reported in 2004 (172) E.L.T. 433 (S.C.) wherein it has been stated fraud negates everything. In view of this, liability to confiscation of the goods cannot be challenged. Since this was a case where an entire conspiracy was hatched out between Philips India, Philips Holland, and J.P. Mody's group companies to overcome the import restrictions and the fact that Philips India itself could not have imported the goods, Philips India could have certainly visualised that there was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... K. Basu Rs. 5 lakhs O-I-O no. 157/07/CAC/CC/KS dated 30-11-07:- Hindustan Engineering Rs. 3,39,54,121/- towards duty and Corporation Rs. 1 crore towards penalty. Peico Electronics Rs. 50 lakhs Shri J.P. Mody Rs. 20 lakhs Shri Suketu J. Mody Rs. 7 lakhs Shri A. Ansari Rs. 5 lakhs Shri V. Ramamrutham Rs. 5 lakhs Shri K. Basu Rs. 5 lakhs Though penalties have been imposed on others, but their appeals were not before us. 41. I shall now deal with the facts relating to third O-I-O no. 156/07/CAC/CC/KS dated 30-11-2007 where the facts are almost identical except for the fact that instead of ATMs and ATMPs what has been imported is modems in the garb of electricals, parts of control panels, control switches etc. Here also Philips India was considering a proposal for manufacture of modems in India as import of modems itself was prohibited and after finding the proposal to be economically unviable they resorted to the same modus operandi by routing the imports of modem through the companies of Shri Mody. There is evidence in the form of exchange of telexes betwee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e department, the applicable rate of customs duty is 100% as against 200% applied by Adjudicating Authority for arriving at the differential duty demanded from the appellants. It may be stated that value has not been challenged by the appellant either in the grounds of appeal or in submissions made before us at the time of hearing of the stay application. Since the duties based only on enhanced value, the appellants are liable to pay at least 50% of Rs. 1,26,27,675/- by allowing them the benefit of change of classification. The goods are liable to confiscation for misdeclaration of value under 111D and 111M of the Customs Act and the confiscation is accordingly upheld. 43. As regards penalty imposed on Dipali Electronics, it was contended by the Ld. Advocate that penalty has been imposed under Section 112 without specifying the sub-section under which it has been imposed. It was submitted penalty cannot be imposed under 112(a) as Dipali Electronics have themselves neither imported nor done any act or omitted to do any act which would render the imported goods liable to confiscation. As regards penalty under Section 112(b) it was submitted that penalty in such case can be imposed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of opinion between the learned Members of the regular Bench which heard the applications. The learned Member (Judicial) of that Bench took the view that all the appeals were to be allowed by way of remand to the adjudicating authority without any pre-deposit having to be made by the appellants. On the other hand, the learned Member (Technical) disagreed with the proposal for remand and, after taking a prima facie view on the substantive issues involved in the case, directed some of the parties to make pre-deposits under Section 129E of the Customs Act, 1962. M/s. Hindustan Engineering Corporation, Pieco Electronics Electricals Ltd., J.P. Mody, S.J. Mody, A.A. Ansari, V. Ramamrutham and K. Basu were accordingly directed to make pre-deposits under Section 129E of the Customs Act. 48. Examined the records and heard both sides. Shri J.P. Mody and Shri S.J. Mody have requested for adjournment of hearing on a common ground. This request will be considered at the appropriate stage. 49. It appears from the records that the learned Commissioner of Customs, in adjudication of three show-cause notices, (a) confirmed demand of duty against M/s. Hindustan Engineering Corporation, (b) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its that the Revenue was taken by surprise when they came to know that one of the learned Members of the regular Bench had chosen to remand the case without asking for pre-deposit. He submits that there was no justification for final disposal of the appeals after hearing both sides on the stay applications. This argument claims support from Govind Sharma v. Commissioner of Customs - 2007 (213) E.L.T. 585 (Tri. - Mum.) = 2007 (6) S.T.R. 302 (Tri.-Mum.) wherein, by majority decision, a regular Bench of this Tribunal held that disposal of the appeal itself without meeting the requirement of Section 129E of the Customs Act was not appropriate inasmuch as both sides needed to be put to notice for presenting their case on merits to avoid prejudice. The difference of opinion which arose in the case of Govind Sharma was framed as follows: "(1) Whether in the facts of the case where the matter has been heard only for stay a final order can be passed without putting revenue on notice that the matter is being finally decided? OR (2) Whether order of Member (Technical) proposing pre-deposit of penalties on the four appellants is to be preferred over the order of Member (Judicial) dispen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... found to have been denied to them by not supplying copies of Bills of Entry containing observations of the assessing authority. In the impugned orders, I have not found anything which indicates that the adjudicating authority relied on any such "observations". Moreover, it is on record that the party had filed a Writ Petition in the High Court against the show-cause notices and that, in the counter affidavit filed by the department, it was submitted that the aforesaid copies of Bills of Entry were not available with the department as the same had already been destroyed. The Hon'ble High Court noted this fact and disposed of the Writ Petition by observing that the adjudicating authority could conclude its proceedings after supplying to the petitioner all those materials and documents which were available. It appears, the plea of the department that the relevant copies of Bills of Entry had been destroyed was never contested by the Writ Petitioner, nor any writ appeal was filed by them. In this scenario, it is futile for M/s. Hindustan Engineering Corporation to reiterate the grievance that the adjudicating authority denied natural justice to them by not furnishing copies of bills o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority sitting in judgment over it. It is settled law that the jurisdiction of a Third Member is circumscribed by the parameters of the point of reference. The contentious point is whether this case is fit for remand without pre-deposit at the stay stage. On this point, I am in full agreement with the learned Member (Technical). The direction issued to some of the appellants to make pre-deposits under Section 129E will, therefore, have to be complied with. 55. At this stage, I take up the adjournment applications of M/s. J.P. Mody and S.J. Mody, who are also among those appellants who have been directed to make pre-deposits. These are on the ground that the wife of Shri J.P. Mody and mother of Shri S.J. Mody is critically ill. I have already found, after hearing other similarly placed parties, that there cannot be remand of this case at stay-stage without pre-deposit. However, in the interest of justice, another opportunity of being heard is being given to S/Shri J.P. Mody and S.J. Mody. Their stay applications may be posted to 15-7-2009. Issue notice to them. Stay applications of S/Shri J.P. Mody and S.J. Mody Date of Hearing: 4-9-2009 56. There being no sitting of the Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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