TMI Blog2020 (3) TMI 1010X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by the appellants is that they have retracted statements and thus, the same lose evidentiary value. We find that the persons concerned have accepted the modus operandi to the knowledge of which, they alone are privy of. Retraction is an understandable after thought employed by the persons to wiggle them out of the legal tangle. We find that the activity of smuggling has not only been accepted by Shri Manish Bavishi but by others involved in the completion of the acts of commission and omission in this regard. We find that retraction, if any, would have had some face value if they could establish licit procurement of the impugned goods. In the absence of the same retraction has no meaning. Another argument taken by the appellants is that the principles of natural justice have been violated and that the adjudicating authority has not given opportunity for being heard and request for cross examination was not granted - Understandably, the appellant has a vested interest in prolonging the proceedings. In such a case, the departmental officers cannot play in to their hands of the appellants in procrastination of the proceedings. We find that legal remedies under the act cannot ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... offence under Drugs and Cosmetics, Act, 1940 the concerned agencies would take necessary action. Therefore, we hold that penalty is not imposable either on Shri Parag Bhavasar or on M/s Palam Pharma either under Section 112 (a) or under Section 112(b) of the Customs, Act, 1962. Application disposed off. - Customs Miscellaneous Application No.85211 of 2019, 85212 of 2019 And Customs Appeal No.550 of 2010, 551 of 2010, 594 of 2010, 614 of 2010, 623 of 2010, 624 of 2010, 633 of 2010 - A/85184-85190/2020 - Dated:- 4-2-2020 - HON BLE MR. S.K. MOHANTY, MEMBER (JUDICIAL) AND HON BLE MR. P. ANJANI KUAMR, MEMBER (TECHNICAL) Shri Nirav P. Shah, Advocate for the Appellant Shri Ramesh Kumar, Authorized Representative for the Respondent ORDER Per: P. Anjani Kumar Heard both sides and perused records of the case. 2. Brief facts of the case are that Shri Manish Bavishi and Shri Tajdin Nazarali Charania were intercepted outside the Customs Arrival Hall (after they passed through Green Channel), in early hours of 20.02.2007, on arrival from Dubai; Pharmaceutical formulations in commercial quantity worth two lakh of rupees was found in their baggage and were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.r.t description of the goods, quantity, Batch No., manufacturing date Expiry date. 2.2. Various statements were recorded as under. (i). Shri Atul Manilal Doshi, an employee of Shri Manish Bavishi, admitted that on many occasions he travelled to Bangkok on behalf of Manish Bavishi and has carried pharmaceutical drugs for him and that all the tickets were booked and paid for by Shri Manish Bavishi through M/s Sadhana Travels, Colaba. (ii). Shri Parag Bhavsar, Director of M/s Palam Pharma, stated on 22.02.2007 that he procured bulk drugs from M/s Reliable Agencies, Bhiwindi; he used to deal only with Shri Manish Bavishi; though M/s Palam Pharma received the sale bills of M/s Reliable Agencies, no bulk drugs were ever received; Shri Manish Bavishi informed him that the bulk drugs would be directly dispatched to the buyer firms; he would be paid 3% commission. (iii). Shri Prem Gobindram Mani, Proprietor of M/s Sadhana Travels Services, stated on 04.07.2007 that Shri Manish Bavishi used to regularly purchase domestic and international airline tickets from himself and his friends; from 2005 onwards, he started booking airline tickets in groups of 6, 8 or 10 passengers for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion of the investigation Show Cause Notices, F. No. DRI/MZU/B/Inv-09/06-07/653 dated 17.08.2007 with an addendum dated 12.12.2007 and an SCN dated F. No. DRI/MZU/B/Inv-09/06-07 dated 28.09.2007 were issued. The same to be confirmed by the commissioner of Customs vide Orders in originals No CCP/ADJ/PD/03/ 2010 and No CCP/ADJ/PD/04/2010 both dated 31.03.2010, confiscating seized goods i.e. 77 Kgs are Miglitol , 8 Kgs are Mifepristone and 1 Kg of Ethynal Estradiol at the ware house of Shri Manish Bavishi; confiscating 4 kg of Meropenem from the premises of M/s Macleod s; confiscating the sale proceeds amounting ₹ 2,96,47,100/- pending payment at the hands of M/s Hetero Drugs Ltd. M/s Hetero Labs Ltd and imposing penalties on different persons involved as under. Hence, the following appeals are filed. Appellant Appeal No. Order in original Penalty under Section 112 (a) 112 b) Rs. Manish Bhavishi C/594/2010 C/Misc/85211/2019 03/2010 dt 31.03.2010. 30,00,000/- do C/633/2010 C/Misc/85212/2019 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AIR 1025; Kamlesh Bhalani of M/s Reliable Agencies and M/s Premium Trading Company said in his statement that invoices were issued to M/s Palam Pharma without goods. However, said statement does not reveal that the goods were smuggled into India without payment of Customs duty; even from the statement of Shri Sandeep Gandhi of M/s Globe Pharma, it is not coming forth that the pharma drugs were smuggled into India; Atul Manilal Doshi stated on 20.02.2007 that though he travelled many times and carried pharma drugs for Manish Bavishi, states that he was not aware of the nature of pharma drugs carried by them. 3.1. Learned counsel submits that Section 111 (d) (l) of Customs Act not applicable since the impugned pharma drugs which are freely importable, are not prohibited goods ; Section 112 (a) of Customs Act is not applicable to the present case since the goods are not liable to confiscation; neither the investigation nor the findings have established that the goods were smuggled; in case of town seizure the onus to establish smuggled nature of goods solely rest on the department since Section 123 of the Customs Act,1962 does not apply as per Circular No. 95/2003-Cus dated 06.1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ii). Lakshman Exports Ltd 2002 (143) ELT 21 (SC), (iii). Swadeshi Polytex Ltd 2000 (122) ELT 641 (SC) (iv). Kalpena Industries Ltd 2018 (361) ELT 271 (Bom). (v). 2016 (334) E.L.T. 71 (Tri.Mumbai) (vi). K.I.Pavunny (1997) 3 Scc 721 (vii).Hyderabad Bottling Co. (P) Ltd 1996 (83) ELT 627 (Tribunal) (viii). Circular: 95/2003-Cus.Dated 06 Nov.2003 (ix). Notification under Section 123 (x). Metal King 2013 (292) ELT 266 (Tri-Mum) (xi). Sultan Durani 2007 (220) ELT 820 (Tri-Mum) (xii). Kalyani Dey 2000(126) ELT 319 (Cal) = (xiii).Chempi Fine Chemicals 2014 (308) ELT 157 (Tri-Mum) (xiv)Mansuklal Parmar 2003 (161) ELT 435(Tri-Bang) (xv). Swarup Enterprise 2015(324) WLR 517 (Tripura) Appeals No C/550/2010(Shri Parag Bhavasar) and C/551/2010 (M/s Pharma Labs) 4. Learned Counsel for the appellants submits that reply to the show cause notice was filed and the questions of law was raised that penalties can be imposed on any person if he is anyway concerned with the confiscated goods; commissioner did not consider the same; it is not disputed that giving license of F.D.A. of one company firm to another person for importing the legally allowed g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... another sister concern, though the main noticee in this case supplied goods alleged to have been smuggled by him to various manufacturers as discussed in the impugned order); such discrimination is illegal and improper; penalty under Section 112(a) and 112(b) cannot be imposed without proving abatement/knowledge in the alleged smuggling of goods by the main noticee; penalty cannot be imposed under Section 112(b) on a corporate entity since only a natural person has the mens rea. it is a settled legal position that imposition of penalty on bona fide purchaser without mens rea is not correct as held in the following cases of CC, Amritsar Vs. Kamal Kapoor 2007 (216) ELT 21 (P H) and Prasanta Sarkar Vs Commissioner of Customs (Prev.), Mumbai 2007 (209) ELT 220 (Tri-Mumbai); mens rea is an essential ingredient for imposing penalty under Section 112(b) of the Act and department did not bring out any evidence suggesting the involvement or knowledge of the appellant in smuggling as held in the following cases. (i). Shankeshwar Metal Corporation Vs Commissioner of Customs (Imports), Mumbai 2014 (312) ELT 344 (Tri-Mumbai) (ii). Rajesh Gandhi Vs CC (Adjudication), Mumbai 2008 (227) ELT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... finding in the impugned order that 4kg of Meropenem seized at the premises of M/s. MacLeod s Pharmaceuticals and the goods sold to M/s Hetero Drugs Ltd and M/s Hetero Labs Ltd. were smuggled, apart from the generic statement of smuggling by Mr. Manish Bavishi; Ld. Adjudicator proceeds on a presumption that the goods were smuggled without any evidence; Authority failed to appreciate that SCN concedes the fact that Palam Pharma was dealing in identical goods being purchased on High Sea Sale basis; therefore in absence of any evidence that these 4kgs bulk drugs were smuggled is at the most a presumption and cannot be sustained; Ld. Authority also failed to appreciate that the goods are not covered by Section 123 and therefore burden is cast on department to adduce sufficient evidence that he goods are smuggled; in absence of any such evidence imposition of penalty is illegal. Learned Counsel further submits that proposal for confiscation of the goods is made under section 111 (d) and 111(1); however, the impugned order fails to record any findings as to how the goods have been rendered liable for confiscation by the acts or omissions of the present Appellant; even if the allegation i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing. (i). 1996 (83) ELT 258 (SC) (ii). Naresh J Sukhawani Vs UOI, 2016 (331) ELT 33 (Del) (iii). S.N Ojha Vs CC, 1997(90) ELT 241 (SC) (iv). KI Pavunny Vs ACCE Cochin, 2014(309) ELT 671 (Ker) (v).K.P. Abdul Majeed Vs CC, Cohin, 2016 (332) ELT 693 (Delhi) 7.1. Shri Ramesh Kumar submits, in respect of seizure of 85 Kgs of Pharmaceutical Bulk Drugs of 1 kg packets each (approx.) of Miglitol and 1 sealed packet of 1 kg each of Ethynal Estradiol from the Warehouse (godown), that Shri Manish Bavishi claimed that these goods were procured by him from M/s Parekh Co., Calcutta against Invoice No. 053//06/07 dated 22.01.2007 and 056/06/07 dated 27.01.2007; on being summoned, Hasmukh Harilal Parekh, Proprietor of M/s Parekh Co., Kolkata, claimed that the said goods were supplied to him by M/s Blessing Products Co., Kolkata; on enquiries it was found that the said premises i.e. address of M/s Blessing Products Co., was in dilapidated condition and un-inhabited for last 2-3 years; Shri Hasmukh Harilal Parekh, in his statement dated 16.08.2007 admitted that he had not supplied any Pharma Bulk Drugs to M/s Balaji Pharma (Mr Manish Bavishi); invoices ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is reply to SCN on 10.02.2010; in this background, Principle of Natural Justice were not violated; principles meant to prevent injustice were being misused by the appellant to prevent justice. 7.3. On the allegation that cross-examination was not granted, Learned AR submits that cross examination was sought of the co-accused; confession by Shri Manish Bavishi on 20.02.2007 was corroborated by all of them; there was nothing new which could come out of cross examination; it was held in Fortune Impex Vs CC Calcutta 2001 (138) ELT 556 (Tri- Kolkata) (Affirmed by SC), that Cross examination not to be allowed of all witnesses if no specific reason given; further it was held in Surjeet Singh Chhabra Vs UOI 1997 (89) ELT 646 (SC) that, not allowing of Cross examination of witnesses where petitioner has confessed, is not violative of principles of natural justice; it was held in Kanungo Co Vs CC Calcutta Others. 1983 (13) ELT 1486 (SC), that Principles of natural justice do not require that in every matter, the person who has given information should be examined in the presence of the Appellant or allowed to be cross-examined by the person concerned in respect of the statements made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s for a commission of 2%; they received cheques from M/s Palam Pharmaceutical Pvt Ltd, encashed the same and handed over cash to Shri Bavishi after deducting their 2% commission; similarly, M/s Globe Pharma, who also issued invoices in the same fashion without supplying the goods are liable for penalties under Section 112(a) and 112(b). 10. Regarding the submissions on behalf of M/s Hetero Drugs Ltd and M/s Hetero Labs Ltd, Learned AR submits that M/s Hetero Drugs Ltd and M/s Hetero Labs Ltd were not aware of smuggled nature of the PBDs; Adjudicating Authority gave a clear finding, at para 84.2, that M/s Hetero Drugs and M/s Hetero Labs received PBDs directly from Mumbai through M/s On Dot Courier, Mumbai; they were aware that the PBDs were of Chinese origin and were not dispatched by M/s Palam Pharmaceutical Pvt Ltd from Mehsena, Gujarat; they had not even asked for import documents, though being aware that imported PBD require a licence; Shri Parag Bhavsar stated that whenever there was any query on the quality of these bulk drugs, M/s Hetero Drugs Ltd. and M/s Hetero Labs Ltd used to deal with Shri Manish Bavishi for clarification; on paper Shri Bavishi was not related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hose PBD to representative of the person who paid for PBD at Hong Kong; he had supplied the bulk drugs to end users like Hetero Drugs Ltd under the cover of invoices of M/s Palam Pharma Pvt. Ltd; M/s Reliable Agencies/Globe Pharma used to issue invoices of for a consideration of 2% commission; no material were physically supplied against these invoices. Shri Kamlesh Bhalani and Shri Rajesh Sheth have confirmed the statement of Shri Manish Bavishi. Shri Bavishi has himself given the address of the godown where 85 Kgs of such bulk drugs were seized. 14. On being asked about the procurement of the 85 kg drugs, Shri Bavishi has stated that they were supplied by one Shri H.H. Parekh of Kolkata, who claimed that the goods were supplied by M/s Blessings Product Company; said company was found to be non-existing; the courier through which the goods were claimed to have been dispatched from Kolkata was also found to be non-existing; the claims made by Shri Parekh regarding the ownership of impugned goods the writ petitions filed by him before Hon ble High Court of Mumbai were dismissed and costs were imposed; Shri Parekh accepted that he has made the claim at the behest of Manish Bavishi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugs specified in schedule-X. Obviously these conditions related to import will have to be looked into by the Customs officers at the time of import. They may inform authorities enforcing Drugs and Cosmetics Act, 1940 for necessary action at their end in relation to such drugs. However, for the purposes of Customs Act, 1962, such drugs become prohibited goods and are liable for confiscation. Customs authorities cannot allow these goods to mingle with the goods in the country and jeopardize the public health at large while taking care of the revenue implications. Besides, the said Drugs are also subject to the condition of registration with the licensing authority in Form 40 either by the manufacturer himself, having a valid wholesale license for sale or distribution of drugs under these Rules, or by his authorized agent in India. In the present case, PBDs are smuggled in contravention of these statutory provisions. We find that Hon ble Apex Court, in the case of Maharashtra State Board of Secondary and Higher Education Vs K.S. Gandhi Others (1991) 2 SCC 716, held that 37. It is thus settled law that strict rules of the Evidence Act, and the standard of proof envisaged therein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y could establish licit procurement of the impugned goods. In the absence of the same retraction has no meaning. We find that retracted statements can also be relied on as held by Apex Court in the case of K.I. Pavunny 1997 (90) E.L.T. 241 (SC). We find that Customs Officers are not Police Officers and the statements recorded by them, even if confessional in nature, are admissible as evidence. Hon ble Apex Court ruled, in Surjeet Singh Chhabra v. UOI 1997(89)ELT 646(SC), that a confessional statement made before a Customs Officer, though retracted within six days, is an admission and binding. 16. We find that another argument taken by the appellants is that the principles of natural justice have been violated and that the adjudicating authority has not given opportunity for being heard and request for cross examination was not granted. Learned counsel for the appellant states that they requested for copies of relied upon documents and inspection of original documents vide letter dated 12.10.2007; Vide letters dated 18.10.2007 and 23.11.2007, the Appellant requested copies of documents seized from his office; vide Order dated 24.01.2008 the Hon ble Bombay High Court gave directio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... omestic and international airline tickets regularly from himself and his friends. Shri Bavishi retracted the statement before magistrate on 21.2.2007 and DRI submitted a rebuttal on 7.3.2007. The submissions made by them in respect of the legal procurement of goods seized at his ware house from H.H. Parekh have fallen flat and Shri Parekh himself has accepted that he has arranged for only documents at the behest of Shri Bavishi and no goods were sent. We find going by the records that the appellants have taken a long time than suggested by Hon ble High Court in obtaining the documents. The proceedings of adjudication/hearing have started in 2009 and continued till 2010 due to adjournments. We find that the first PH was given on 20.1.2009; Shri Bavishi vide his letter dated 17.1.2009, requested for adjournment stating that he wants to inspect documents; second time PH was given on 10.02.2009, Shri Bavishi again requested for adjournment vide his letter dated 4.2.2009 citing reason that he has not completed inspection of documents; third time PH was given on 16.02.2009, Shri Bavishi sought adjournment; he filed reply ultimately on 10.02.2010; fourth time PH was given on 16.02.2010; h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rule. We would not hesitate to hold that the said right necessarily attributed by reasonable opportunity and by principles of natural justice, its availment would depend on the nature of proceedings involved and the provisions of the statute; though we do not intend to lay down that it is an absolute right vested in a party. In view of the above, we find that learned commissioner has taken the decision in view of the circumstances of the case. We find that thus, the principles of natural justice are not violated. 19. We find that the appellants have relied upon the following cases. We find that Apex Court in the case of CCE, Bangalore Vs Srikumar Agencies (Civil Appeal Nos. 4872-4892 of 2000, decided on 27-11- 2008) held that 5. Circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. Disposal of cases by blindly placing reliance on a decision is not proper. The following words of Lord Denning in the matter of applying precedents have become locus classicus: Each case depends on its own facts and a close similarity between one case and another is not enough because even a single signifi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s supplied to M/s Hetero Drugs Ltd, Hyderabad Baddi, Himachal Pradesh, we find that none of the Noticees has challenged confiscation of PBD and the sale proceed of PBD from M/s Hetero Drugs Ltd. Shri K V Bhaskara Reddy, GM (Finance), M/s Hetero Drugs Ltd confirmed purchase of PBD from M/s Palam Pharma. We find that it was confirmed by M/s Hetero Drugs Ltd, Mumbai that 25 Kgs of Miglitol (WIP) received from M/s Palam Pharma was lying in stock at their Baddi Unit. Scrutiny of the documents submitted by M/s Hetero Drugs/Hetero Labs revealed that even though the invoices were issued by M/s Palam Pharma, the Pharma drugs were received by them through ON DOT Courier from Mumbai and not from Mehsana where M/s Palam Pharma is situated. M/s Hetero drugs vide their letter dated 10.4.2007, confirmed that they have purchased goods from M/s Palam Pharma and amounts a below are due in respect of M/s Hetero Drugs Limited Bill No. Date Amount in Rs. 195 11.01.07 3549600.00 201 19.01.07 1774800.00 194 11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Hetero Labs against the invoices of M/s Palam Pharmaceuticals Pvt Ltd, backed by invoices issued by Shri Kamlesh in the name of M/s Reliable Agency and others, are those which were smuggled by Shri Manish Bavishi through air passengers sent by him. He did not have any Licence in Form 10, for the import of bulk drugs, issued by FDA. Therefore, we hold that Shri Manish Bavishi has involved himself in omissions and commissions can be relied for confiscation of the goods and consequentially the sale proceeds wherever applicable liable for confiscation. We find that Shri Manish Bavishi has been the kingpin and masterminded the smuggling operations. He has meticulously planned to send couriers to smuggle bulk drugs from china and other countries; he used to arrange for affixing labels w.r.t description of the goods, quantity, Batch No., manufacturing date Expiry date in his factory/warehouse; he has utilised the services of M/s reliable agencies and others to issue invoices showing procurement by M/s Palam Pharma. He refused to sign the Panchnama drawn after extracting the details of CDs before independent Panchas; refused to give any clarification on the material details availabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty cannot be levied on either Shri Parag Bhavsar or M/s Pharma Labs. Moreover, M/s Pharma labs being a company, cannot be said to have a mens rea to impose penalty under Section 112(b).They may have helped Shri Manish Bavishi, after the goods have been illegally smuggled in to India. We are of the opinion that the word abets should be read in conjunction with act/omission necessarily under the Customs, Act, 1962. The allegation of abetting, if any, is in relation to the sale and purchase of bulk drugs in the course of trade within India. The whole allegation is that they have issued invoices without receiving or sending goods physically. In that case, they cannot be alleged to have dealt with goods within the meaning of Section 112(b) of the Customs, Act 1962, more so when the knowledge of the goods being smuggled is absent. If the appellants have committed any offence under Drugs and Cosmetics, Act, 1940 the concerned agencies would take necessary action. Therefore, we hold that penalty is not imposable either on Shri Parag Bhavasar or on M/s Palam Pharma either under Section 112 (a) or under Section 112(b) of the Customs, Act, 1962. 25. Learned counsel for M/s Hetero La ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there is no allegation that the Appellants had any role to play in the alleged illegal imports; there are no findings that the Appellants were in any way concerned with the alleged illegal imports; allegation against the appellants is that they have issued the invoices at the behest of one Mr. Bhavishi without actually receiving or selling any goods; Appellants never dealt with the impugned goods in any manner whatsoever; goods were directly sent to M/s. Palam Pharma by Mr. Bavishi and the Appellants had no role to play in actual delivery; as accepted in SCN, Mr. Bavishi was also importing Pharmaceutical drugs on payment of duty; thus, it is erroneous to presume that the all goods dealt with by Mr. Bavishi were illegal; there were no reasons for the Appellants to harbor any belief that Mr. Bavishi is dealing in the goods imported illegally; it is alleged that impugned invoices have been issued at the behest of Mr. Bavishi, by M/s Reliable Agencies, which is Proprietary concern of Mr. Rajesh Doshi; no SCN was issued to Mr. Rajesh Doshi; this renders impugned Notice bad in Law; commissioner wrongly finds that there is a burden cast upon him to ascertain the origin of the goods; ther ..... X X X X Extracts X X X X X X X X Extracts X X X X
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