Full Judgment
2. We have heard the arguments of the counsels for the appellants and the departmental representative.
3. So far as Choice Laboratories is concerned, the advocate for this appellant has produced a certificate dated 19-9-1999 issued by the appropriate authority showing full and final settlement of its dues under the Kar Vivad Samadhan Scheme, 1998. Accordingly, the appeal of Choice Laboratories is dismissed as withdrawn.
4. We now turn to the appeal of Ratilal Hemraj. The Collector finds that this appellant imported, contrary to law, 2.2 tons of clove bud oil valued at Rs. 7.27 lakhs approx. and wrongly cleared free of duty under Notification 159/90. He has therefore ordered recovery of duty payable on goods of Rs. 7.34 lakhs after adjusting the cash deposit of Rs. 7.34 lakhs which was already made and recovery of Rs. 1.00 lakh towards fine in lieu of confiscation [ordered under Clause (o) of Section 111 of the Act] in terms of the bond executed by Ratilal Hemraj.
5. The Collector finds that this appellant purchased an advance licence issued to Choice Laboratories permitting import of these goods by Choice Laboratories by claiming the benefit of the notification.
Therefore, the goods have been transferred by sale by the actual importer on record. The contention of the counsel for the appellant are these. The order for shipment of the goods had been placed to the foreign supplier by Ratilal Hemraj. The goods had been sold by it on high sea sales basis to Choice Laboratories. The goods were therefore imported into India by Choice Laboratories. After the goods were imported by Choice Laboratories they were sold to Ratilal Hemraj and payment was made to Choice Laboratories. Therefore, the goods have been cleared without payment of duty and not liable to confiscation. It is alternatively claimed in the appeal that Ratilal Hemraj, the importer of the goods was not liable to penalty for the reason that in any case the goods are not liable to confiscation. The reason that the Collector advances for such confiscation that Modvat credit had been availed of and clove bud oil has not been used in the exported product are not sufficient in law. The Collector has not considered the submissions by Choice Laboratories that it had not availed of Modvat credit.
6. The argument on behalf of Fresh Laboratories was that no reason is given for imposition of penalty on it. In his order, the Collector accepts that it had not imported any goods nor its import licence has been utilised for import of these goods. The Collector accepts that there is no evidence for imposition of penalty on Bhupendra Shah. The reasoning advanced by the Collector is that the contract for sale of peppermint oil on high sea basis by it to Choice Laboratories had been executed on its letter head and signed by Yogesh Korani as a partner of this firm was a result of incorrect inferences the appellant had made itself the letter head available to Yogesh in connection with the import by it. Yogesh was never a partner in the firm and he misrepresented the facts. Hence no penalty is imposable.
7. The argument on behalf of Yogesh Korani are these. He was only concerned with the sale of 2.2 tons of clove bud oil imported by Ratilal Hemraj and import of 1.9 tons of peppermint oil to Indian Flavours and Fragrance Pvt. Ltd. and he was not concerned with the import or disposal of other goods. Penalty on him is therefore excessive.
8. The basis, upon which the Collector concludes that the licences were sold, is the statements of parties. In his statement of 23-8-1993, Ashwin Patel, the partner of Choice Laboratories has said that one of the licenses. No. 3400533 was to expire on 30-6-1993. They were unable to complete the export following the break up of USSR and it therefore decided to sell the licence at a premium of 25%. In his further statement, he had indicated how Yogesh Korani was authorised to import and clear the goods flavouring compound in the name of their firm. He had repeated in his another statement. Yogesh Korani, in his statement of 18-10-1993, has confirmed the purchase by him of this licence at 25% premium, and said that he in turn sold the licence to Ratilal Hemraj for import of 2.22 kg of clove bud oil. He said that he also imported and cleared under that licence, two consignments of peppermint oil, wherein two tons approximately. He had stated that he had imported this consignment originally in the name of Fresh Laboratories but latter on receiving the offer to sell of the licence from Choice Laboratories, he arranged a contract of high seas purchase in the name of Choice Laboratories the licence and DEEC passbook were debited for these imports were that of Choice Laboratories. The contentions on behalf of Ratilal Hemraj are these. There was, in fact, no sale of the licence.
The licence being non-transferable could not have been sold. What was really done was for Yogesh Korani to place order for import of the goods but, before they were imported, i.e. before they reached the territorial waters, they were sold on high seas basis to Choice Laboratories. This is what in fact Yogesh Korani had said. The imports were therefore made by Choice Laboratories who in turn sold the goods to Ratilal Hermraj. Choice Laboratories could legally sell these goods, because the export obligation had in respect of this licence had been completed. This is what in fact the Commissioner finds in his order.
The Commissioner records that out of the total export obligation of 1500 tons tooth paste, Choice Laboratories had already exported 1324 tons and not just 828 tons as mentioned in the notice. In the manufacture of this quantity of tooth paste, Choice Laboratories had used 2.3 tons of clove bud oil, as certified by the Superintendent of Central Excise having jurisdiction over their factory. They were therefore entitled to import this quantity and clear them without payment of duty and sell it. The reasons that the Commissioner advances for not accepting the certificate, that it has not been explained how this was issued and the records were under seizure with the DRI, is not valid.
9. It is not possible to accept the contention that there was in fact no sale of the licence. So far as the clove bud oil is concerned, the following are not disputed: The goods were ordered by Ratilal Hemraj from the foreign supplier and did not belong to Choice Laboratories shortly before that firm filed a bill of entry for their clearance.
After the goods were cleared without payment of duty in terms of that licence and the notification, they were again sold to Ratilal Hemraj.
The contention is that each of these was a genuine transaction permitted by law and there is therefore no sale of the licence. The importer is not Ratilal Hemraj, as the Commissioner has held, but Choice Laboratories. We have however to take note of various other facts. The licence was issued to Choice Laboratories shortly after arrangement were made for importation of the goods. The transaction was mediated by Yogesh Korani. It is he who approached Ratilal Hemraj representing to him that Choice Laboratories has an advance licence for import of the clove bud oil. Ashwin Patel, a partner of Choice Laboratories, in his statement dated 23-8-1993, has said that the licence 3400533, dated 18-3-1991 was to expire on 30-6-1993. As the firm was not in a position to secure export orders due to break up of the U.S.S.R, it decided to sell the licence in respect of flavouring compound and remaining quantity of glycerine. Accordingly, it sold the advance licence at a premium of 25% to Yogesh Korani. He said in his further statement of 25-8-1993 that Yogesh Korani was authorised to import the goods in the name of his firm i.e. Choice Laboratories.
Obviously both the licences could be made use. He said that he was not aware that Yogesh Korani has already effected import and clearance of any material under the licence. After being shown debit in the licence and the DEEC book, he confirmed that the consignment of clove bud oil shown therein were the one which had been arranged to be imported by Yogesh Korani. It is to be noted that at no point, did he refer to any arrangement with Ratilal Hemraj. His entire narration is confined to Yogesh Korani. Whatever transaction took place, therefore, took place between Choice Laboratories and Yogesh Korani. Vipul Parekh of Ratilal Hemraj, in his own statement, confirms that he had negotiated for import of 2.22 tons of clove bud oil from Colgate Palmolive in the USA for which he has opened a letter of credit. When the consignment was en route to India, Yogesh Korani offered to him the advance licence of Choice Laboratories for import of clove bud oil at the premium of 35%.
He has agreed for this offer to it. Therefore, he had made a contract in which he was to sell the consignment to Choice Laboratories. He says that the consignment was cleared by him as well as by Yogesh Korani through Custom House Agent and after clearance, he sold the goods to Colgate Palmolive but had not raised any invoice. This is confirmed by Narendra Navalchand Tolia, proprietor of Shree Tolia Shipping Service, the CHA. He says that it was Yogesh Korani who handed over to him documents for clearance of the clove bud oil, although Vipul Parekh of Ratilal Hemraj used to enquire regarding its clearance. He says that after clearance it was delivered to a premises at Parel, Mumbai on instructions of Yogesh Korani. DW Rangekar, purchase manager of Colgate Palmolive has also confirmed the purchase by that company of 2.00 tons of clove bud oil from Ratilal Hemraj.
10. In his various statements, Yogesh Korani has also confirmed the purchase by him of the licence of Choice Laboratories (No. 3400533) regarding which he was aware that the export obligation has not been fulfilled. He purchased the licence at a low premium of 25% since it was to expire shortly. He says that he sold the licence to Ratilal Hemraj for import of 2.22 tons of clove bud oil. He accepted that he was personally monitoring the clearance of consignment of clove bud oil in the name of Choice Laboratories.
11. It is also to be noted that, after the statements were recorded Ratilal Hemraj wrote on 5-10-1993 to the Deputy Director of the Directorate of Revenue Intelligence. In that letter, it claimed to be the importer. It stated that it had sold the clove bud oil to Colgate Palmolive and requested the DRI to consider the request for release of the seized goods sympathetically. Following facts are put before the DRI for kind consideration : "The goods cleared under the bill of entry were originally imported in the name of our firm and would clear the same on payment of appropriate amount of duty but however in the meantime, Yogesh Korani of Mahavir Exports and Imports approached us and convinced that he will be in a position to clear the said goods under the DEEC book taking a premium of 30% equivalent to CIF value.
Since the licence's validity was very short, we thought the percentage of equivalent premium to be fair and we made a payment of Rs. 2.00 lakhs against the said consignment to Mahavir Exports and Import Company and he agreed to deliver the said goods after clearance at our door steps." It is also significant that the provisional release of the clove bud oil was made to Ratilal Hemraj.
12. From these facts, it is clear to us that the goods were imported by Ratilal Hemraj, and cleared by it through Customs utilising the licence of Choice Laboratories. The claim that the real importer is Choice Laboratories and that only Ratilal Hemraj only figure before and after importation is rebutted by the stand of the parties. It is not contended before us that these various statements were obtained under unlawful means and their admissions should be disregarded. The fact that the goods were sold by Ratilal Hemraj to Colgate Palmolives, and that there is no claim before the investigating officials that they sold the goods to Ratilal Hemraj further confirms this view. In reality, therefore, the import was not by Choice Laboratories but by Ratilal Hemraj. Therefore, the advance licence of the Choice Laboratories utilised for the clearance of goods carrying with the benefit of exemption under notification could not be available. Duty is therefore rightly demanded from Ratilal Hemraj. As a result of these activities, these persons also become liable to penalty.
13. The claim that the export obligations have been fulfilled is in fact not supported by anything other than some letter of the Superintendent of Central Excise.
14. The alternative claim of Ratilal Hemraj is that Choice Laboratories are entitled to import goods without payment of duty in terms of the advance licence and sell them to any other persons, because they were imported as replenishment of clove bud oil already used by it towards manufacture of toothpaste which was exported in fulfilment of the obligations. We have already concluded that "high sea sale" was a fictitious cover and that the real importer was Ratilal Hemraj. We will briefly deal with this claim for the sake of completeness. The claim of Choice Laboratories is based on a certificate of the Superintendent of Central Excise to the effect that clove bud oil has been used and no Modvat credit has been taken on clove bud oil. The Commissioner finds that the factory records of this firm, which was scrutinised, do not show that it had purchased clove bud oil during the period when the export goods were manufacture. He finds that it had not produced any evidence of acquisition or consumption of clove bud oil in the quantity of toothpaste exported by it. No reason has been advanced for over turning this finding. Further, it is not known on what authority the Superintendent has issued this certificate. We therefore do not find any reason to question the Commissioner's findings.
15. It was contended on behalf of Yogesh Korani that he was not at the centre of events, as the Commissioner finds, and that he was only concerned with a few transactions, the sale of peppermint oil and sale of clove bud oil. He further contended that since Choice Laboratories has settled its dues under the Kar Vivad Samadhan Scheme, the benefit would also be available to him. The judgment of the Kerala High Court in Tom. K. Thomas v. Union of India and Ors. in support is cited. If Yogesh Korani became liable to penalty as a result, of involvement of Choice Laboratories, his claim would have to be accepted. However, it is clear from the evidence that we have cited, Yogesh Korani not only arranged for sale of the licence, he was also concerned with the importation of the goods under the licence which he knew that was not permitted, and subsequently dealt with the goods. It is he who dealt with the Custom House and took active role in dealing between the parties. His role therefore continued even after the role of Choice Laboratories stopped. Therefore, the benefit of the Kerala High Court's judgment will not be available to him. Considering the active participation, we do not find any ground for leniency.
16. So far as Fresh Laboratories is concerned, the Commissioner's order is contradictory. He has imposed a penalty of Rs. 1.00 lakh on it "considering that they had not imported any goods nor has their import licence been utilised". In that event, why he could legally impose a penalty at all becomes a question. We therefore extend the benefit of doubt to Fresh Laboratories and set aside the penalty imposed on it.