Full Judgment
Shri Raghavendran, employee of Rs. 2,00,000/- ATD 8.
Shri C. Dilip Kumar, employee of Rs. 10,000/- Crompton Greaves Ltd. 2. The facts relevant for appreciation of the issue in dispute are that on 12/09/1994 officers of the Marine and Preventive, wing of the Customs, Bombay detained a consignment of computers imported by M/s.
ATD. Perusal of the documents submitted to them showed that they had sought permission from Development Commissioner, SEEPZ, for manufacture of Mini and Micro computer systems vide application dated 16/08/1993 in which they declared 15% value addition, that their activity amounted to manufacture, that all the manufacturing operations would be carried out in the same premises and would consist of procurement of sub-assemblies and peripherals and assembling them in computer system unit. The Joint Development Commissioner, SEEPZ granted M/s. ATD permission to sell 981 numbers of computer systems in DTA vide his letter dated 13/07/1994.
3. Examination of the imported packages showed that instead of computer parts and peripherals they contained fully integrated systems and 12 number of computer systems in dis-assembled form; totalling 107 computers of complete systems.
4. Statements of officers of the importer were recorded; Shri Raghavendran, General Manager (Marketing) of ATD stated inter alia that the computer systems were to be supplied to M/s. Crompton Greaves Limited (hereinafter referred to as CGL) as DTA clearance; that CGL had negotiated prices with M/s. Packard Bell Limited; that he was present at the time of examination of the consignment and that fully integrated computer systems were received which require no assembling activity; that the bill of entry was prepared on the basis of purchase order; that the invoice was not as per the purchase order; that a wrong description was given by ATD in the bill of entry as parts and peripherals; office premises of Mr. C.K. Bajpai of CGL was searched on 21/09/1994 which resulted in recovery of certain documents such as (1) letter dated 07/07/1994 addressed to CGL by Packard Bell Limited, giving break down mentioned in the price order with price break up. Fax of 15/07/1994 from Raghavendra to Packard Bell (copy endorsed to C.K.Bajpai) placing order on Packard Bell for 107 numbers of computer systems; Packard Bell; invoice dated 18/08/1994 indicated supply of fully integrated computer systems of four models and fax dated 20/07/1994 from Packard Bell to CK Bajpai confirmed receipt of purchase order dated 14/07/1994 for 107 machines. Statements of CK Bajpai and Dilip Kumar of CGL were recorded on 14/11/1994, 17/11/1994 and 16/12/1994 wherein they stated that CGL had entered into an tie up with Packard Bell for marketing computer systems in India, they negotiated the prices with the supplier and intended to import computer systems in fully working condition; that their packing instructions were for complete systems; that one Mr. Raghvendran of Tandon Group, ATD, who was importing computers for Compaq, Acer, etc., approached them and offered to supply the Complete computer systems at 20% value addition; that after negotiating the price for four models of computer systems with M/s. Packard Bell, they informed ATD about the quantity, price and number of systems to be imported and issue of purchase order; that Raghavendran of ATD had informed him that he wanted 10% of the consignment in dis-assembled form and gave the manner of its packing and requested for preparing supply of various components and accordingly he (Bajpai) prepared the split up and sent it to Packard Bell, confirmed the same and on the basis of the above, ATD prepared their purchase order dated 14/07/2004; that he met Jamie Muir of Packard Bell in U.K. on 15/07/1994 and explained to him about import of consignment through ATD and about 10% of the consignment being in disassembled form for showing to customs for examination; that he and Dilip Kumar inspected the consignment at Packard Bell on 14/08/1994, that Raghavendran of ATD requested him to inform him the serial numbers of the box containing computer systems in disassembled form and it was decided that first 5 boxes, serial Nos. 1 to 5 would contain computer system in disassembled form. Shri Bajpai also stated that he met Mr.
Tandon of ATD and in the presence of Raghavendran discussed the price of the computers and import details had to be worked out by Raghavendran, that it was clearly understood by everybody that Packard Bell computer will be imported as such by ATD. The statement of Dilip Kumar of CGL, was also recorded, in which he also confirmed that computer systems were being shipped as required by customers; that Raghavendran called to import computers and order was placed on him,; that 10% of the consignment was supposed to be sent as spares; Statements of other persons were also recorded.
5. Import of computer systems up to CIF value of Rs. 1,50,000/- or keyboards, or monitors each with a CIF value below Rs. 7500/- was restricted and they could be imported only against a licence or in accordance with public notice to be issued vide para 156 F, serial No.5 of Exim Policy 1992-97. Notification 133/94-Cus dated 22/06/1994 provided for permitting an EOU/EPZ to import free of duty all types of goods including capital goods required for manufacture, production or processing provided they were not prohibited item in the Negative List.
Para-94 of the Exim Policy also provided for the same.
6. Since the imported goods were found to be computer systems which did not require any further assembly or manufacture, their import was restricted. The importers, M/s. ATD did not possess a valid import licence for their clearance. Hence show cause notice dated 03/02/1995 was issued to ATD, its Managing Director and Executives, M/s. CGL and its officers, M/s. Packard Bell, M/s. Airfreight Limited and its Managing Director and others, proposing the following: a) confiscation of the 107 numbers of computer systems under Section 111(d) and (m) of the Customs Act 1962; b) enhancement of the transaction value under Rule 11 of the Customs Valuation (Determination of Price) Rules read with Section 14(1) of the Act; c) imposition of penalty under Section 112(a), (b) for acts of omission and commission rendering the goods liable to confiscation under Section 111.
7. The notices filed replies. The adjudicating authority ordered confiscation with option to redeem, confirmed duty demand and imposed penalties on the notices. He, however, dropped proposal for loading of the value. Hence these appeals.
8. We have heard the learned Counsels and learned DR. As far as CGL is concerned the findings of the Commissioner are contrary to the charges in the show cause notice inasmuch as, whereas the show cause notice clearly holds ATD to be the importer and does not make any allegation against CGL of master minding the imports, the order holds CGL to be the defacto importer who had master minded the conspiracy of import of complete computer systems in the guise of parts. Further there is no material on record either in the form of any statement of the officers of CGL or any fax or letter or any other communication from CGL either to ATD or Packard Bell which would bring out knowledge on the part of CGL that ATD was importing anything other than fully manufactured computers. ATD itself has not implicated CGL in this respect. M/s. CGL only interacted with Packard Bell after ATD placed the order on Packard Bell so as to carry out packing instructions from ATD to Packard Bell and the fact that these instructions emanated from ATD is brought out in the show cause notice as well as in the statement of ATD's officials. The goods were cleared by ATD through customs and taken to SEEPZ and it was ATD that requested M/s. Airfreight Limited to give the delivery order, who handed over the delivery order to them assuring, Airfreight Limited that consignee SBI would shortly give the bank authorisation letter for handing over of the delivery order. CGL was neither the importer did it have any role to play in the post importation process of clearance of the goods. The Commissioner has arrived at the conclusion that M/s. CGL masterminded the conspiracy solely on the basis of purported internal notes and communication by Packard Bell which did not form part of the show cause notice and therefore not supplied to CGL. Further these documents were purportedly furnished by Packard Bell after the issue of the show cause notice, and by that time Packard Bell was aware of the stand taken in defence by CGL and others. Since the documents of Packard Bell are not part of the show cause notice, they cannot be relied upon. We therefore, set aside the finding on liability of CGL to penalty on the basis of such documents. By the same token penalties imposed on Shri Bajpai and Dilip Kumar are also set aside.
9. M/s. ATD have not disputed that what was imported by them were complete computer systems, and therefore the only prayer before us is for leniency in the quantum of fine and penalty. On the other hand the Revenue seeks enhancement of the penalty imposed on ATD.10. The finding of the Commissioner that ATD imported complete computer systems in the guise of parts is not contested by learned Counsel during the hearing before the Tribunal. They are only pleading for reduction of fine and penalty. M/s. CGL were appointed to act as Packard Bell's Non-Exclusive Sales Concessionaire in India for their computer products. CGL opened the distributorship of Packard Bell in India, procedure for import of goods, its pricing, shipment details, etc. CGL directly negotiated and finalised all the above directly with Packard Bell in terms of the distributorship agreement entered into between Packard Bell and CGL on or about 06/07/2004. The Commissioner has clearly held in para 51 of the impugned order that at the stage of negotiations and finalising all the agreements between Packard Bell and CGL, M/s. ATD was nowhere in the picture. The quantum of penalty imposed on M/s. ATD has been arrived at by the Commissioner after taking into account all relevant facts. However, looking to the totality of the facts and circumstances of the case we are of the view that the penalty calls for some reduction and accordingly we reduce the penalty on M/s. ATD to Rs. 2,50,000/-. We, however, see no need to interfere with the quantum of fine, having regard to the value of the goods. We also uphold the duty demand. Thus appeal No. C/523/1995-Bom of M/s. ATD is partly allowed and appeal No. C/400/1996-Bom of the Revenue is rejected.
11. As for M/s. Airfreight Limited (herein after referred to as AFL), as agents of foreign freight forwarders they were required to give notice to the importer that the goods have arrived in India; the importer has to approach the consignee bank (in this case SBI) and make payments as required and obtain a letter of authority from the bank mat the goods may be released to the importer. The importer presents this letter of authority to AFL and in turn AFL gives the importer the delivery order. The role of AFL ends here. Importer takes the delivery order to the clearing agent who collects the consignment from the arrival warehouse of the Customs Department for examination and completion of customs formalities after which the goods are cleared and thereafter the importer takes over the goods and removes them from the customs area. There is a long standing commercial practice between banks, importers and agents in case of the cargo is urgently required and the importer is a bonafide party who is a frequent importer, for the agents to give the delivery order to the importer before receipt of bank's letter of authority which the importer undertakes to furnish. In this case ATD is a regular importer who approached AFL and requested for an urgent delivery order, promising to furnish the consignee bank letter of authority, and in good faith and in accordance with the established practice, AFL handed over the delivery order to ATD.However, this does not mean that AFL handed over the imported goods to ATD as ATD is still required to have the goods examined by customs and customs formalities completed, with which AFL admittedly was never involved. In these circumstances AFL did not contravene any of the provisions of the Customs Act as merely handing over a delivery order which is not a customs document cannot constitute aiding or abetting or conspiring. We further note that the Commissioner himself has categorically held that AFL were "duped and fooled" into releasing the delivery order and therefore he could not have concluded that there was any conspiracy involving AFL, The penalty imposed on AFL is therefore clearly unsustainable and we accordingly set aside the same.
12. As regards State Bank of India and Shri K.V. Kajrekar, we note that M/s. ATD approached the Bank on 04/08/1994 with an application for opening a LC which was opened on OS/08/1994 on ABN Amro, Netherlands.
The shipping documents were received by the bank on 05/09/1994 and on 08/09/1994 the bank advised ATD to accept the Bill of Exchange. Date before which discrepancy memo was to be drawn was 13^th September, 1994 as 10^th and 11^th September, was Saturday and Sunday (holidays). The discrepancy memo is dated 10^th September, 1994. The bank pointed out certain discrepancies vide the letter dated 15-16/09/19994. The allegation in the show cause notice is that Shri Kajrekar, officer of the SBI had colluded with M/S. ATD to fabricate the pre-dated discrepancy memo with a view to enable M/s. ATD to mis-represent to the Customs authorities that the shipper had sent goods which did not confirm to the purchase order and the LC conditions and withheld the supplier's payment. The contention of the learned Counsel is that as per Clause (4) of the UCP guidelines the discrepancy had to be drawn up within 7 working days and that there was no violation of any of the provisions of the Customs Act so as to be liable to penalty under Section 112. The Bank was entitled to withhold payment if the documents received by it were not in consonance with the terms of the Letter of Credit and it was for these reason that the bank withheld payment and not because it had colluded with the importer. The further contention is that all the transactions of the Tandon Group of Companies (M/s.
ATD, etc.) vis-a-vis the bank were inspected by the Customs authorities and RBI and no impropriety was found. The above contentions are to our mind sufficient to hold that penalty on Kajrekar is not sustainable. We accordingly set aside the same.
13. We also note that the bank did not release the original airway bill to ATD which would enable them to take possession of the goods from M/s. Airfreight (although ATD took delivery without the knowledge of the bank). The Commissioner further holds that M/s. ATD has "clearly duped both Airfreight as well as SBI" and therefore the Commissioner cannot conclude that SBI or its officers had colluded with M/s. ATD.14. The grievance of SBI that adverse remark made against it in internal page 97 of the impugned order wherein he has held that: "Unfortunately, of late it is noticed that SBI and its managerial staff are getting involved in several frauds and this is one such fraud in which the bank has sought to protect the interest of some of its unscrupulous clients totally disregarding UCP guidelines on the established banking procedures to be followed in regard to international transactions. If one condone such actions the interest of international trade would suffer." is well founded. The Commissioner was required to limit his findings to the case before him find was not justified in passing of the above adverse remarks of the nature. It is prejudicial to the interest of the bank. We therefore expunge the above remarks.
15. In the result appeal No. C/523/1995-Bom of ATD is partly allowed; and appeal Nos. C/532/1995, C/552/1995, C/553/1995, C/554/1995, C/555/1995 & C/556/1995 of M/s. Air Freight Ltd., Shri K. V. Kajrekar, State Bank of India, M/s. Crompton Greaves Ltd., Mr. C.K Bajpai, and Mr. C. Dilip Kumar are allowed in toto. The appeal No. (7400/1996 filed by the Revenue is dismissed.