TMI Blog2007 (4) TMI 524X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in their appeal and to set aside the Final Order of the CESTAT in so far as M/s. MNS Exports Ltd. and Shri Narayana Bhatt are concerned. Shri Vikram Jain also appealed to the High Court. 2. The following questions of law were raised before the Hon ble High Court. (i) Whether the Tribunal was right in holding that the first respondent company was not responsible for the acts and omission of its authorized representative contrary to the provision of Section 147(2) of the Customs Act? (ii) Whether the Tribunal was right in totally exonerating the first respondent from any duty liability, on the basis that the act of the authorized representative was not within its knowledge and hence Section 147(2) of the Act is not applicable to the present case? 2.1 After hearing the parties, the High Court remanded the matter to this Bench with the following observations in CSTA No. 24/2005 (Appeal of the Revenue) : 8. Accordingly, the appeal is allowed and the impugned order is set aside in so far as the present respondents are concerned. The matter is remitted back to the Tribunal without answering the questions of law raised before us in the light of non-availability of fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the onus to prove the contrary as required under Section 147(2) of the Customs Act has not been discharged. He urged that the Commissioner has elaborately discussed this point. He stated that all the three employees who filed the Bills of Entry in the name of the company were paid employees of the appellant company. They assumed the status of servants while the appellant company has the status of master. Therefore, the laws relating to vicarious liability for wrongs committed by servants will devolve upon the appellant company as master. 8. Shri G. Shiva Dass, before arguing the case, gave a very detailed submission along with various case-laws and relevant extracts from the Indian Contract Act as commented in various standard books on the subject. Shri Kiran Javali also submitted a written detailed submission along with the case-laws relied on him. 9. We have heard all the parties. Our de novo findings are as follows :- 9.1. M/s. MNS Exports Private Limited were a 100% EOU engaged in the manufacture of ready made garments. Under the EOU Scheme, goods can be imported duty free under an obligation for export of finished goods. Normally, the goods imported by a 100% EOU w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal. The exports were in the name of M/s. Texworth International. These facts have not been disputed. Even as per the investigation, the 12 consignments which were imported in the name of M/s. MNS Exports Private Ltd. never reached the premises of M/s. MNS Exports Private Ltd. However, the Show Cause Notice dated 22-10-1999, has been issued inter alia to M/s. MNS Exports Private Ltd. and Shri Narayana Bhatt, Managing Director of M/s. MNS Exports Private Ltd. As far as M/s. MNS Exports Private Ltd. is concerned, the Show Cause Notice issued demands the following amounts :- (i) An amount of Rs. 7,29,572/- under Section 72 of the Customs Act in respect of goods which were clandestinely removed and kept outside the licenced premises. In the Final Order passed by this Bench, the above demand was set aside. Revenue did not challenge this in their appeal before the Hon ble High Court. Therefore, the setting aside of this demand has become final. We are not going to examine this issue in this de novo order. (ii) The second demand in the Show Cause Notice to M/s. MNS Exports Private Ltd. amounts to Rs. 34,54,338/-. This is in respect of the 12 consignments imported in the name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er mt. His statement also explains as to how he got hold of the import documents from Shri Vikram Jain and arranged for clearance of the impugned consignments with help of M/s. MNS Exports staff. (IV) Smt. Shilla Shree has made a payment of Rs. 15,000/- through cheque bearing No. 007345 dtd. 13-11-97 of UTI Bank, Magrath Road, Bangalore, to Shri Raviprakash towards the commission payable by Shri Bhaskar for the clearance of import consignment effected on his instructions. (V) The car bearing registration No. KA 01 P 1094 was used for transportation of silk fabric weighing around 120 KGs out of one of the consignments cleared pertaining to AWB No. 058 3750 7982 and 058 3751 3011, containing 400 KGs and 433 KGs. Thus, the Commissioner has come to the conclusion that conspiracy has been hatched by Vikram Jain with the help of H. Bhaskar for the import of the consignments in the name of M/s. MNS Exports Private Ltd. The Commissioner has not concluded that M/s. MNS Exports and Shri Narayana Bhatt are responsible for the import of the 12 consignments. Still, the Commissioner holds that M/s. MNS Exports Private Ltd. are liable to pay the import duty on the 12 consignments. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with M/s. Myer s. When the imported consignments were exported after re-cycling, they were exported to M/s. Myer s of Singapore. Thus, the goods were neither ordered by M/s. MNS Exports Private Ltd. for import nor have they been brought to the bonded premises. How can we say that they are the importers of the consignments? The documents which were necessary for clearance of imported goods were given by Shri Vikram Jain to Shri H. Bhaskar, who in turn, gave them to the employees of M/s. MNS Exports Private Ltd. This is also clear from the investigation and these facts have not been disputed. The Hon ble High Court of Bombay, in the case of M. Shashikant Co and Others v. UOI and Others -1987 (30) E.L.T. 868 (Bom.) has held that the Principal can never be guilty for the wrongful acts of the agent which were done without notice to the Principal . In the above mentioned case, the appellants M/s. M. Shashikant Co. gave a letter of Authority in favour of M/s. Mangla Brothers to import permissible OGL items under a licence which belonged to them. However, M/s. Mangla Brothers imported Beef Tallow which is not authorized. Thus, M/s. Mangia Brothers exceeded their authority. When the ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... olicy on the ship, but not the premium for the policy on the cargo. It was held in Radheshyam Agarwal v. UOI Others - AIR 1980 Madhya Pradesh 95, that Railways were not liable in a case where fictitious receipts were issued by Railway servants even without receiving the goods. The Railways Administration cannot be held liable for the act of its servants in issuing a railway receipt without delivery of the goods for carriage by the consignor to the railway administration, even on the basis of illustration (b) to Section 238 of the Contract Act. The ratio of this case is also squarely applicable to the present case. It is on record that M/s. MNS Exports Private Ltd. never received the 12 consignments in their bonded warehouse even though their employees fraudulently imported the consignments in the name of M/s. MNS I Exports and diverted the same. 9.3. Now let us turn our attention to Section 147 of the Customs Act. Section 147. Liability of principal and agent (1) Where this Act requires anything to be done by the owner, importer or exporter of any goods, it may be done on his behalf by his agent. (2) Any such thing done by an agent of the owner, importer or expo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gent and not for the mala fide acts committed by the Agent or the Custom House Officers. On examination of Section 147 of the Customs Act, 1962, it is found that Section 147(1) of the Customs Act contemplates that an agent can on behalf of the owner, importer or the exporter do things which the Act requires the owner, importer or the exporter to do. Section 147(2) thereof stipulates any such thing done by an agent shall, unless the contrary is proved, be deemed to have been done with the knowledge and the consent of such owner importer etc. Therefore, an importer is liable to establish that the actions of the CHA were in excess of the authority given to him. If that is on record, then in terms of the exception set out in Section 147(2), the importer would not be liable. In terms of Section 147(3) an agent is also considered to be an importer of the goods in addition to the liability of the importer. The proviso to Section 147(3) states that if a short-levy or a non-levy arises as a result of an act which is not wilful in nature on the part of the agent, the amount is to be recovered first from the owner and then from the agent. A conjoint reading of the above provisions would indic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iple is liable only for the bona fide acts of the agent and not otherwise. In the present case, the three employees have not acted in a bona fide manner in the import of consignments in the name of M/s. MNS Exports Private Ltd. For personal gains, they had betrayed, M/s. MNS Exports Private Ltd. and committed fraud. In these circumstances, we cannot hold M/s. MNS Exports Private Ltd. liable for the acts of their employees. 9.5. In the criminal complaint filed before the Special Court for Economic Offences, there was no allegation that either the appellant company or Shri Narayana Bhatt, Managing Director, were in any way involved in the fradulent imports. On the contrary, the complaint specifically records the accused (3), (4) and (5) who were authorized by their company M/s. MNS Exports Pvt. Ltd. for their bona fide imports misused their position in league with the second accused who in turn paid them commission out of the total amount received from the first accused for fradulantly clearing the consignments. The 12 consignments cleared in the name of M/s. MNS Exports Private Ltd. were never taken to the factory but were diverted by the accused (3), (4) and (5) to the first ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Exports Private Ltd., one cannot hold that they are the importers. 9.7. The learned Consultant contended that it is not a legal necessity for an importer to be the owner of the imported goods. He referred to Section 46 of the Customs Act and urged that as per sub-section (4), an importer, while presenting a Bill of Entry is required to subscribe a declaration as to the truth of the contents of such Bill of Entry and produce supporting documents relating to the imported goods. In the present case, the authorized employee of the appellant company complied with the statutory requirement as in the case of the goods admittedly imported by M/s. MNS Exports Private Ltd. Therefore, according to Shri Choudhury, the Commissioner was legally right in holding M/s. MNS Exports Private Ltd. as importer. He relied on the following case-laws :- (a) Indian Telephone Industries Ltd. v. CC, Madras - 1997 (92) E.L.T. 463 (S.C.) (b) CC, Calcutta v. Dytron (India) Ltd. - 1999 (108) E.L.T. 342 (Cal.) (c) Chaudhary International v. CC, Bombay - 1999 (109) E.L.T. 371 (T) (d) Sitaram Rajgarhia v. CC, New Delhi - 1997 (90) E.L.T. 472 (T) (e) Siemens Nixdorf Information Systems ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h placed order with the foreign supplier in the name of Chaudhury International and was willing to get the goods released on payment of duty and fine is not the importer. This case is also not at all relevant. In this case decided by CEGAT, New Delhi, it is on record that one firm placed order with the foreign supplier and another firm filed the imported documents. In that case, the company which filed the import documents like of Bill of Entry, etc. did not allege any fraud by the other firm. Therefore, reliance on this case-law is also misplaced. 9.12. In the case of Sitaram Rajgarhia, the importer who filed the documents contended that the goods were imported by M/s. Aarkey Electronics. The Tribunal merely observed that if there were any contract between the party and M/s. Aarkey Electronics, it was open to the party to recover the amount from M/s. Aarkey Electronics as per the provisions of law. In the present case, there is no contract between M/s. MNS Exports Private Ltd. and Shri Vikram Jain. It is not the contention of M/s. MNS Exports Private Ltd. that the 12 consignments were imported based on a contract with Shri Vikram Jain. Hence this case-law also is totally inappro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o do not hold M/s. MNS Exports Private Ltd. as importer under the Customs Act in respect of the 12 consignments in their name fraudulently by Vikram Jain. No nexus has been established between M/s. MNS Exports Private Ltd. and M/s. Myer s Ltd. who exported the goods to India. Therefore, no duty liability rests with them. We do not find any ground for imposition of penalty on Shri Narayana Bhatt, MD also. Therefore, we set aside the demand of duty of Rs. 34,54,338/-. We also set aside the penalties imposed on M/s. MNS Exports Private Ltd. and Shri Narayana Bhatt under Section 112 of the Customs Act. C/11/2000 Shri Vikram Jain v. CC, Bangalore 11. In deciding the role of Shri Vikram Jain in the entire episode and his liability to penalty under the Customs Act, we shall set out the charges against him as narrated in the Show Cause Notice dated 22-10-1999. Para 9 of the Show Cause Notice refers to the statement dated 18-5-1999 of Shri H. Bhaskar. The gist of that statement so far as it relates to Shri Vikram Jain is as follows :- (i) Shri H. Bhaskar knew Shri Vikram Jain of M/s. Texworth International, Bangalore for a long time even before joining the Department. (ii) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , BTM Layout, II Stage, N.S. Palya, Bangalore. (xv) The import documents were not received by him from Raviprakash or Prasad. (xvi) Shri Vikram Jain informed him about the existence and re-cyling of the content and also he was not aware of any DEEC facility availed by Vikram Jain. (xvii) The entire transaction on the imports made were by Vikram Jain and apart from no one was involved. (xviii) After reading the statements of Raviprakash and B. Prasad, Shri Bhaskar admitted the same to be correct. 11.1. Paras 12, 13, 14 15 of the Show Cause Notice give the facts as stated by Shri Vikram Jain.; A statement dated 13-5-1999 was recorded under Section 108 of the Customs Act, 1962. In the said statement, Shri Jain has indicated that a person by name Shri Mohan, working in M/s. Sandhya Silks, Bangalore, gave him the idea to export rejected silk fabrics to Singapore. Mohan promised help in exporting the rejected silk fabrics to Singapore and the import of the same consignment without payment of Duty with the help of a person who was the son of the Proprietor of M/s. Sandhya Silks and working in Customs Office. Later, he came to know that the said person was Shri H. Bhaskar, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n all the AWBs shown to him pertained to the reimportation of the export goods made by him under various Invoices. He also stated Shri Bhaskar and Shri Mohan got the goods cleared from ACC, Bangalore. As regards the benefit derived by M/s. Myer s, Shri Jain stated that they would get 3% as commission on the Invoice value. He had also stated that he paid the amount of 3% commission to M/s. Myer s. In a statement dated 14-5-1999, Shri Vikram Jain had stated that he was not aware of Shri Bhaskar and Shri Mohan as he had not visited their residence at any point of time. In his statement dated 19-5-1999, Shri Jain had stated that he had obtained 3 Advance licences in the name of M/s. Texworth International from JDGFT and had completed the export obligation in respect of two licences. He had sold one licence to M/s Digvijay Biscuits (Silk Division), Bangalore and to M/s. MM Exports, Calcutta. In a telegram dated 17-5-1999, Shri Jain retracted the statements already given. 11.2 Para 37 of the Show Cause Notice summarises the allegations against Shri Vikram Jain. The same is reproduced below :- 37. And whereas, Shri Vikram Jain, Proprietor of M/s. Texworth International, Bangalore, ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Bhaskar and the employees of M/s. MNS Exports Private Ltd., the Commissioner has come to the following conclusion as recorded in para 107 of the Adjudication Order. 107. Thus, the statements of Shri H. Bhaskar, considered together with the statements of employees of M/s. MNS Exports, clearly prove that Shri Vikram Jain, in collusion with Shri H. Bhaskar, got the imported consignments cleared in the name of M/s. MNS Exports, without payment of duty by mis-declaration and received the same for the purposes of re-cycling and exporting, in order to achieve export obligation under DEEC in respect of the Advance licences obtained from DGHFT. The goods so cleared are liable for confiscation under Sec. 111 of the C.A. 1962. In view of this, I hold that Shri Vikram Jain is liable for penal action under Sec. 112(b)(ii) of the C.A.1962. 11.6. We cannot fault with the conclusions reached by the Adjudicating Authority in respect of Shri Vikram Jain for the following reasons :- Shri Vikram Jain himself in his statements had given wealth of details with regard to the activities indulged by him with the connivance of Shri Bhaskar. The name of some Mohan crops up in his statements. Eve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt effected on his instructions. 11.7. In the course of de novo hearing before the Tribunal, the learned Counsel Shri Kiran S. Javali, urged the following points :- If the contention of M/s. MNS Exports Private Ltd. that they are not the importers is accepted, then, the charge set out against them at para 38 of the Show Cause Notice would be set aside by the Tribunal. In that case, the charge against Vikram Jain as set out in para 42 of the Show Cause Notice would not be sustained by itself. We do not understand the logic of the Counsel. Even from the conclusions of the Adjudicating Authority, it is very clear that the goods were imported fraudulently in the name of M/s. MNS Exports Private Ltd. and they never, reached the 100% EOU. However, there is ample evidence to show how Shri Vikram Jain, with the help of Bhaskar and the three employees of M/s. MNS Exports Private Ltd., imported goods in the name of M/s. MNS Exports Private Ltd. and cleared them free of duty. There is also evidence for re-cycling. All these have been done with a view to show fulfillment of export obligations under DEEC Scheme. Shri Jain had admitted paying commission of 3% to M/s. Myer s of Singapore who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect of two Show Cause Notices at (c) and (d), the appeals of Shri Vikram Jain had been allowed and penalties set aside. In respect of the Show Cause Notice relating to Kanika Apparels, the penalty of Rs. 20,000/- has been confirmed. In the first three Show Cause Notices, the charge against Shri Vikram Jain had been the same. Since the entire act, as is being alleged by the Department, is a conspiracy and consequently, penalties cannot be levied again and again. Since a penalty of Rs. 20,000/- has been levied and confirmed for the same purpose, once again penalty under Section 112 cannot be confirmed. 12. We are not persuaded by the above argument of the learned Advocate. It is true that Shri Vikram Jain adopted the same modus operandii in the case of other companies including Kanika Apparels. Even though, the modus operandii are the same, proceedings have been initiated in respect of each company and in each case, Vikram Jain has been involved. We cannot say that the case of MNS Exports Private Ltd. is identical with that of Kanika Apparels and, therefore, if in Kanika Apparels he had been penalized, he could not be proceeded against in respect of MNS Exports Private Ltd. If ..... X X X X Extracts X X X X X X X X Extracts X X X X
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