Judgment:
1. These five appeals arise from a single order in original passed by Collector of Central Excise, Meerut whereby he had imposed penalty of Rs. 1,00,000/ - (Rupees one lakh) on the appellants, M/s. More Water Pipes Limited and penalties of Rs. 10,000/- each on the other four appellants Under Section 112 (a) of Customs Act, 1962. In addition he directed that an amount of Rs. ten lakhs should be paid as the value of the contravening goods which were held to be liable to confiscation but which were not available for confiscation. He had also directed that the amount of Rs. 26,73,159.75 deposited by the first appellant be apportioned to Customs duty on the 245 M.T. of PVC Resins imported by them Under Section 28 (1) of the Customs Act, 1962. The appeals were heard together when Shri A.S. Sunder Rajan, learned Consultant appeared for all the appellants and Shri Jangir Singh, Departmental Representative appeared for the respondent Collector. This common order disposes of all these five appeals.
2. Shri Sunder Rajan, learned consultant stated that the duty payable in respect of the imported material in question has been paid. The goods were permissible for import under OGL. Section 112 of Customs.
Act,1962 will not be applicable unless the goods are rendered liable to confiscation. The goods in question had been released and were not available for confiscation. There is no provision for ordering the payment of amount of Rs. 10 lakhs as the value of the goods in question. The goods were not liable for confiscation. It was a simple case of amount of duty not levied and paid. They have since paid the duty amount and hence penal action was not warranted. He pleaded that the appeals be allowed.
3. The arguments were resisted by Shri Jangir Singh, Departmental Representative.
4. We have considered the submissions. We have perused the record.We find that the material in question was 245 Metric Tonnes of PVC Resin valued at Rs. 38 lakhs out of a consignment of 500 Metric Tonnes of the goods imported in Bombay. The goods were claimed to have been imported under Open General Licence (OGL) Appendix 6 List 8 Part I Sl. No.496 in the April 1988 March 1991 Policy. The goods were assessed in the into Bond Bills of Entry to duty at the Tariff Rate of duty and allowed to be warehoused. They were moved in bond to Central Warehousing Corporation (CWC) Bond in Ghaziabad. They filed 9 Exbond Bills of Entry and cleared them free of duty tinder Exemption Notification 117/88 dated 30-3-1988 against Export and Import Pass Book No. 0044027 dated 7-4-1989. It has come out in the statement dated 1-9-1990 of Shri G.P.Bhargava, Personnel Manager of the appellant company that he had submitted 9 Bills of Entry along with the original and photocopy of the Pass Book No. 0044027 dated 7-4-1989 to Shri A.P. Singh, Inspector (Customs) incharge CWC Ghaziabad for the clearance of the goods and that the Inspector allowed the clearance after making the entry of the imported PVC resin on the photocopy of the said Pass Book and that no endorsement was made on the original Pass Book. That Pass book which did not have the entry regarding the Imported PVC Resin having been allowed duty free clearance was later on surrendered by their Sales Manager, Shri V.S. Krishnan to the Joint Chief Controller of Imports and Exports (JCCI&E) as unutilised. The Pass Book issued by the JCCI & E with the Port of Registration Bombay was not, however, presented by them to the Bombay Customs authorities for registration. While returning the Pass Book to JCCI & E, New Delhi as unutilised, they requested for redemption of the undertaking executed by them with the licensing authorities in terms of para 386 of the Hand Book of Procedures (AM 88-91). The request was acceded to by JCCI & E and communicated to them vide letter dated 12-2-1990.
5. The aforesaid and other connected details come to the knowledge of the Customs authorities after search of the sales office-cum-residence and the factory-cum-registered office of the appellant company by the officers of the Directorate of Revenue Intelligence, New Delhi on receipt of intelligence that they had imported and cleared 245 M.Tonnes of PVC Resin without payment of duty and without fulfilling export obligations and surrendered the Pass Book to JCCI & E, New Delhi as unutilised whereupon the Pass Book was cancelled by that authority.
Following the search, documents relating to the above transactions were recovered and statements recorded from Sarva Shri D.D. Agarwal, Managing Director, Dr. Rajat Gupta, Director, Shri G.P. Bhargava, Personnel Manager and Shri V.S. Krishnan, Sales Manager which confirmed the aforementioned sequence of events.
6. The statements recorded from the concerned persons mentioned above bring out the role played by each one of them in the transactions in questions, Dr. Rajat Gupta who is a Director of the company is the son of Shri D.D. Agarwal, its Managing Director. It was stated by Shri Agarwal in his statements dated 1-9-1990 and 3-9-1990 that the job relating to the placing of the import order for PVC Resin was looked after by his son, Dr. Rajat Gupta and that the latter also looked after local sales of the imported PVC Resin. He stated that he was aware of the export obligations under the Pass Book scheme which they had not fulfilled as they were not having an order in hand. Dr. Rajat Gupta admitted in his statement dated 1-9-1990 that the clearance of 245 M.T.of PVC Resins against the Pass Book without payment of duty was not proper and the constituted an offence for which he was responsible as the Director of the firm and penalty, if any. He stated that the PVC Resin was used in their factory for the production of PVC pipes and fittings which was sold in the domestic market. In his letter dated 7-1-1991 addressed to the Deputy Director, Directorate of Revenue Intelligence, New Delhi, he stated that they had realised, that it was a gross mistake on their part to have cleared the goods without payment of Customs duty without making any corresponding endorsement to that effect in the relative Import Pass Book No. P/E/0044027 dated 7-4-1989 and its surrender to JCCI&E, New Delhi as unutilised.
7. In the appeal memorandum a reference has been made to their submission in reply to the show cause notice that the blame for the lapses lay equally, if not more, on the Customs Officers who had knowingly failed to debit the Import Export Pass Book. It was also their submission before the Collector that the goods were not liable to confiscation under any of the clauses (d), (m) and (o) of Section 111 of Customs Act and hence the provisions of Section 112 were not-attracted. It was further submitted that the goods were liable for confiscation as they were not available for confiscation. It was only a case of short levy and a bona fide mistake. These arguments have been reiterated in the appeal. The Collector's order directing them to pay an amount of Rs. 10 lakhs as the value of the contravening goods held liable to confiscation but not available for confiscation has been assailed in the appeal as being without any legal authority. It has been pleaded that there was a bona fide communication gap between the various officers of the company dealing with the subject import and that no mala fide could be attributed to them in the course of discharge of their official duties. They had produced the Import Export Pass Book to the proper officer of Customs and non-posting of entries relating to the import of the goods in the Pass Book was solely due to the omission on the part of the officer and not the appellants. The drawing up of the proceedings was to cover up the errors of commission and omission on the part of the departmental officers. No penalty was leviable on the company and the executives. As an alternative plea it has been submitted that even assuming that penalty was leviable the penalty of Rs. 1 lakh on the company was excessive by any standard.
8. The reliefs claimed in the appeals are inter alia the quashing of the order appropriating the amount of Rs. 21,73,159 as without jurisdiction. Quashing the order directing payment of Rs. 10 lakhs in lieu of confiscation as also of the imposition of penalty on the company and the individuals has been sought.
9. On a perusal of the impugned order it is seen that the Collector has remarked that since the parties have admitted their guilt, he was taking a lenient view of the matter. He had directed the amount of Rs. 26,73,159.75 deposited by them to be apportioned as Customs duty leviable on the goods imported by them. The objection to this does not merit any consideration. The goods had been cleared by them without payment of duty and the amount has been deposited by them to make good the duty not paid by them. Notice Under Section 28 of Customs Act had been issued by the Assistant Collector. The appellants' liability to pay the amount of duty had also been accepted by the Managing Director and Director. They had paid the amount. Collector passed the order appropriating that amount towards the duty due Under Section 28 of the Act. There is no merit in the plea for quashing of the order in this regard.
10. As regards the direction in the order for them to pay Rs. 10 lakhs as value of the contravening goods, the objection taken is that the goods were not available for confiscation and hence no amount can be directed to be paid. We find that the appellants had not obtained provisional release of the goods at the time of clearance of the goods executing a bond Undertaking to produce them, if so directed by the department. If such a course had been followed and if the appellants had failed to comply with the direction it would have been open to the adjudicating authority to proceed in the matter in terms of such a bond and appropriate the security. The order does not refer to any such bond and the appropriation of any sum deposited under such a bond. In the circumstances, the direction to pay the sum in question as value of the contravening goods held liable to confiscation Under Sections 111 (m) and 111 (o) of Customs Act cannot be supported. The liability to confiscation has been contested by the appellants. We do not agree with the plea in this regard at least insofar as the application of Section 111 (o) is concerned. The goods were cleared duty free under an exemption Notification which required that the goods to be manufactured therefrom would be exported. A time limit was also applicable for such export. The condition not having been fulfilled the liability to confiscation was attracted but the goods had been released free of duty without taking any safeguards. In the circumstances, the order directing payment of Rs. 10 lakhs as the value of the contravening goods is without legal authority and is set aside.
11. As regards penalty, we note the appellant's plea that the same would arise only if the goods were rendered liable to confiscation. As we have held that the goods were liable to confiscation, Section 112 (a) was attracted. Liability to penalty is dependent on liability to confiscation and not actual confiscation. Section 111 (o) provides for the liability to confiscation of goods exempted subject to any condition from any duty in respect of which the condition is not observed unless the non-observance of the condition was sanctioned by the proper officer. The conditions under the relevant exemption Notification in terms of which they had cleared the goods duty free had not been fulfilled by them. Hence the goods became liable to confiscation. They could not, however, be confiscated as they were not physically available. The imposition of penalty on the appellant is fully justified. The same is upheld. In fact, we are of the opinion that the penalty amount is low and not commensurate with the offence.
The payment of duty by the appellants is pursuant to the visit to their premises and carrying out checks of their records following receipt of intelligence that they had cleared the material in question without payment of duty and had not discharged the export obligation but sold their products in local market. But for such verification by the Directorate Officers, the duty would not have been paid and the appellants would have successfully evaded the duty.
12. The penalty imposed on the four individuals who have filed appeals is of Rs. 10,000/ each. Each of them was connected with the import and disposal of the goods and the non-observance of the export obligation cast on them. The explanation given of a bona fide mistake and a communication gap between them is too naive to be accepted. The executives and the Directors have handled three Pass Books, as stated in the order and they were aware of the export obligation. The Sales Manager had applied for the Pass Books and had subsequently attended to the work of getting it discharged by the JCCI & E. He was holding Power of Attorney for making application to JCCI & E/CC1&E for procuring licences. He has stated that as the Pass Book showed no entries regarding the clearance of any material he had presumed that no import had been made and accordingly he had taken steps to return the Pass Book to JCCI&E, New Delhi and got the undertaking cancelled. It is not believable that the Personnel Manager, Shri Bhargava who had arranged to get the goods cleared without payment of duty against the Pass Book had not noticed that the Pass Book given by him to the officer had been returned without any entry being made therein about the goods cleared .The conduct of both the Sales Manager Shri Krishnan and Personnel Manager, Shri Bhargava is blameworthy. The imposition of penalty on them is fully justified as also the penalty imposed on the Managing Director, Shri D.D. Agarwal and Dr. Rajat Gupta, Director.
13. In the result, the order directing the payment of Rs. 10 lakhs as the value of the contravening goods held liable to confiscation but not available for such confiscation is set aside. Imposition of penalty on the company is upheld. The company's appeal is thus partly allowed. The order imposing penalty on the other appellants is upheld. Their appeals are dismissed.
14. Before parting with the matter we would like to observe that the release of the imported goods free of duty without making suitable entry in the Export Import Pass Book which had also reportedly been tendered by the appellants to the department enabling the appellants to evade payment of the duty due thereon discloses a serious procedural lapse. It is to be hoped that this is only a stray case and there are proper safeguards available in the normal working of the Customs department to ensure that in such cases where the duty free release of the imported goods is contingent upon export performance by the concerned importer, such an obligation is properly monitored to ensure strict compliance. A copy of this order may be sent to the Chairman, Central Board of Excise and Customs, to have the matter looked into.