Full Judgment
Dimple Overseas Ltd (now known as M/s ABH International & hereinafter referred to as M/s. DOL for short and S K Gandhi (now Mg. Director of M/s ABH International).
1.2 Before proceeding to the issues raised vide notice issued on 30/12/97 and which resulted in the impugned order dtd 16.8.2000, it is necessary to recapitulate the background and the circumstances under which this notice dtd 30.12.97 came to be issued. The Commissioner in CA-5 application records, we reproduce verbatim, the same - M/s Dimple Overseas Ltd, New Delhi (M/s DOL) has filed 10 shipping bills for the export of Polyethylene Newar/Straps to U.A.E. based firm viz. M/s. International Textiles Company, Ajmhn, U.A.E. under Value based Advance Licenses in January 1993. The quantity mentioned in each of these Shipping Bills was 3 Lakh meters and the declared FOB value was declared as US $3 Lakhs calculated @ US $ 1.00 per meter. Thus, the total FOB value of 10 shipping bills was US$ 30 Lakhs or Rs. 8,59,72,000/- (calculated @ US $ 3,4895 = Rs 100) During the month of February, 1993 the officers of Directorate of revenue Intelligence (DRI) suspecting over invoicing of the export consignment intercepted and seized the said consignment. It was also gathered that the export consignment of Newar/Straps was made out of recycled/waste plastic material as per the opinion of the Chemical expert (IIT. Bombay) as against declaration by M/s DOL that the export goods were made out of HDPE Granules. As per the initial investigations, DRI estimated the value of export consignment to be not more than Rs 45 lakhs.
Shipment of the said export goods was allowed in pursuance of an interim order dtd 1.3.93 of the Delhi High Court in a writ petition no 1081/93 filed by M/s. DOL Subsequently, a show cause notice was issued to M/s. DOL on 10.1.94 on completion of the investigation, alleging that M/s. DOL had misdeclared the description as well as the value of the export goods as required under clause 3(3) of the Export Trade Control Order. 1998, thereby, rendering the export goods as prohibited under Section 11 of the Customs Act, 1962 and as such liable for confiscation under Section 113 (d) of the Act. The case was adjudicated by the Commissioner, Kandla vide order in original dtd 15.3.94 who dropped the charges framed against M/s. DOL. The commissioner's said order was reviewed by the Board with the direction to file an appeal before Hon'ble CEGAT. The appeal was filed in June 1994. The CEGAT, in its order dtd 22.12.94 held that there were materials to indicate that the goods were not made from prime HDPE granules and remanded the matter back to the lower authorities for fresh adjudication on the quality aspect after giving opportunity to the parties to make representations. So far as the question of valuation under Section 14 (1) of the Act was concerned, CEGAT upheld the views that the same had no application since the goods were not dutiable.
The said order of Hon'ble CEGAT was appealed against by M/s DOL before Hon'ble Supreme Court on the ground that Hon'ble CEGAT should have decided the issue instead of remanding the case back to Commissioner for fresh adjudication. The department also filed an appeal in April, 1995, before Hon'ble Supreme Court against the said order of Hon'ble CEGAT where in it was observed that Section 14(1) of the Act was not applicable as the goods were not dutiable. In the appeal of M/s. DOL, Hon'ble Supreme Court, vide order dtd 8.9.95 directed CEGAT to dispose of the matter on merits. The Hon'ble CEGAT thereafter, vide its order dtd 31.10.95 disposed of the matter holding that the goods were made from prime quality granules and since the only ground for invoking clause 3(3) of the Export (control) Order was with reference to the quality aspect, the said provisions were not applicable. Aggrieved by the said order of Hon'ble CEGAT, the department preferred an appeal before Hon'ble Supreme Court but the same was dismissed on 19.1.96.
However, the department's appeal against the first order dtd 22.12.94 of Hon'ble CEGAT holding that Section 14 (1) of the Act was not applicable, was heard by the Hon'ble Supreme Court on 31.7.96. But in view of its earlier orders dtd 8.9.95 and 19.1.96, the Court dismissed the appeal while observing that issue of application of Section 14 (1) to export goods was left open.
Keeping in view the observation of Hon'ble Supreme Court and the fact that the exports in the impugned case were to be made towards discharge of export obligation after fulfillment of which the exporter (M/s DOL) was entitled to duty free imports of the goods, the duty being of the order of about Rs. 7,85,81,250/- it became absolutely essential to arrive at the correct value of the export goods. Therefore, DRI launched fresh investigations into all aspects of the case with particular emphasis on determining the correct and factual value of the export goods. During these investigations, inquiries were made from the Council (Economic), Consulate General of India, Dubai, exporter Shri V K Gandhi of M/s DOL, Shri R S Sodhbans, Honorary. Secretary, Delhi Chamber of Commerce, New Delhi Officials of the Enforcement Directorate, Customs Officials at Dubai, Customs officials at Kandla and several others considered capable of contributing towards the ultimate objective of fresh investigations.
Having gathered sufficient evidences against M/s. DOL as a result of extensive investigations carried out by DRI, a fresh show cause notice was issued to M/s DOL on 30.12.1997 on the basis of fresh evidences received from the Consulate General of India, Dubai, in the form of copies of Bills of Entry in which the value declared in Dubai was US $ 0.10 per meter. M/s DOL had exported Polyethylene Newar strips declaring the FOB value as US $ 1 per meter. M/s DOL had exported total 30 lakhs meters of Newar with a total declared FOB value of US $ 30,00,000/- whereas the importer in Dubai had only declared total value of US $ 30,00,000/- for the said goods. Thus there was over valuation to the extent of ten times. It was clearly brought out in the show cause notice that M/s DOL had knowingly and willfully fabricated two parallel sets of 10 invoices bearing same numbers one to be filed before the Indian Customs at the time of export showing export value US $ 3 lakhs per invoice and the second sent to his buyer namely M/s International Textiles Co. Ajman showing FOB value of US $ 3,00,000/- M/s DOL had intentionally over valued the goods taking undue export benefits under the five value based advance licences against which the goods were exported.
1.3 Perusal of the impugned order & the material in the application reveals Commissioner has brought out the reasons in a concise fashion for arriving at his decision, in order impugned dtd 16.8.2000 as follows- i) The fresh Show Cause Notice was issued on totally fresh grounds concerning an important aspect which was deliberately and specifically left open by Hon'ble Supreme Court and therefore, the same was substantially different from the earlier Show Cause Notice and that there is no violation of the principles of 'resjudicata' since the matter of the applicability of the Section 14 of the Act to the export of duty free goods was not finally settled or decided.
ii) That the issue of misdeclaration was already decided by the Hon'ble CEGAT, the matter has attained finality in view of the Hon'ble Supreme Court's directive to the CEGAT in this regard after which the Hon'ble CEGAT passed the final order accepting the description of the goods tendered by the exporter.
iii) That the department is justified in invoking Section 14 (1) of the Customs Act, 1962 to determine the value of the goods sought to be exported by M/s DOL, that the value of export goods, irrespective of whether they are dutiable or not can be determined under Section 14 (1) of Customs Act 1962.
iv) That the allegation of the department that the invoices obtained from Consulate General of India, Dubai were forged by M/s DOL is highly speculative and not supported by any concrete corroborative evidence. That the importer at Dubai also had an equal justification, if not more, to misdeclare the value of imports at their end.
v) That Shri Kamal Chaddha, the importer had confessed before the Income Tax authorities that his employees had forged the invoices without his knowledge to save the import duty.
vi) That the investigation has not been able to conclusively pinpoint the actual offenders in this case as well as the persons responsible for the forgery.
vii) That the investigation has not been done with regard to actual role played by the staff of the importer at Dubai.
viii) That the invoices were forged by Shri Kamal Chaddha's employees, which as per his confession was done without his knowledge and of which M/s DOL was not a party. That since there is no concrete evidence to the contrary, this has to be accepted as such a factual position.
ix) Commissioner of Customs has further observed that the forgery had been done without the knowledge of Shri Kamal Chaddha and hence obviously without the knowledge of the notice M/s DOL and Shri V K Gandhi.
x) That the statements of Shri Malkhan Singh and Jaskaran Jain relied upon by the department had been retracted and therefore lose relevance and become redundant.
xi) That since remittance through banking channel has been received, there is no violation of FERA, 1973 in as much as the provisions of Section 18 of FERA does not appear to be applicable in the instant case.
xii) That the margins of profit of about 1900% is indeed very high and indicates that the goods are abnormally priced and in fact is suggestive of manipulation or stage managed pricing. But at the same time the Commissioner has observed that the investigation, inspite of its valiant and bold efforts, has not been able to put forth foolproof, physical evidence in support of the allegations.
xiii) That the investigation has failed to conclusively establish that the transaction was not at arms length. On the contrary, it appears from the records that the exporter and the importer are totally unrelated to each other.
xiv) Finally, the Commissioner has held that the Show Cause Notice is no longer sustainable and the exported goods are not liable for confiscation and noticees are not liable for any penalty.
1.4 The grounds for finding this order to be not legal or and proper are- 1. a) The department has produced the evidence that the difference between the price on which the goods are purchased and exported is about 1900%. A profit of this level in itself is abnormal in the trade and suggestive of over-valuation. However, this alone is not the evidence is over-valuation as would be seen from the evidence in the succeeding paragraph. The adjudicating authority itself has observed that the margin of profit of about 1900% is very high and indicates that the goods were abnormally priced and also suggestive of manipulation. But he dropped the proceedings on the ground that the degree of evidence produced by the department are not adequate to sustain the case.
b) The adjudicating authority's judgement suffers from grave error is not correctly appreciating very cogent and convincing evidence adduced by the department.
2. a) FOB value declared at the time of export US $ 30 lakhs and whereas the importer in Dubai declared the value only US $ 3 lakhs for the same goods. In both the cases the values were declared based on the invoices issued by the exporter. The invoices submitted at the time of export were signed by the employee of the company Malkhan Singh. The invoices submitted in Dubai at the time of clearance were signed by Jaskaran Jain who is also an employee of the exporting company. Both in their statements had confirmed the authenticity of the signatures.
b) subsequent retraction is merely an after-thought, particularly in view of the fact that they were employees of the exporter and other circumstances of the case.
3. a) In the invoices submitted to Dubai Customs, it was found that the signature of R S Sodhbans, Honorary Secretary of Delhi Chamber of commerce was found to be forged.
b) This could have been done only by the exporter as he is the beneficiary of the fraud.
4. a) The adjudicating authority has wrongly placed reliance on the version of the importer that the invoices submitted to Dubai Customs were forged by the employee of his firm without his knowledge to save Custom duty. There is ample contradiction on the above version of the importer. The exporter claims that the invoices submitted by the importer were not supplied by them. On the other hand the importer claims that the invoices were supplied by the exporter and the same have been forged by his employee after taking copies.
b) It is strange to accept that the employee indulged in forgery and manipulation of documents to save Customs duty and that too without the knowledge of the employer. This defies logic. Further, it is highly strange that the importer has come forward on his own and claimed before the Income tax authorities that the invoices were manipulated or forged by this employees and that too without his knowledge.
5. a) Shri Kamal Chaddha has not produced any corroborative evidence for the alleged misconduct of his employees and in fact he made allegations against persons who did not have any opportunity to defend themselves. Based on the principle of pre-ponderance of probability and the other evidences, the Income Tax authorities have rejected the evidenciary value of the importer's version and accordingly not come to conclusion based on the statement of Mr Chaddha.
b) Strangely, the adjudicating authority, on the contrary, has practically based his decision only on Kamal Chaddha's statement. It is surprising that the importer has come forward on his own to accept forgery which serves only one purpose i.e. protecting the interest of the exporter. Moreover, Chaddha's statement has not been substantiated with any evidence either direct of circumstantial.
6. a) As per Section 106 of the Evidence Act, when any fact is especially within the knowledge of any person, the burden of proving that fact is upon him. This is basically the exception to the general rule. When the fact to be proved is solely within the knowledge of the party, it is for him to prove that fact.
b) On the contrary, he has taken the statement of Chaddha on the face value, even though the department has proved the case of over valuation with adequate evidences, and decided the case in fovour of the party. Since the act of forgery is within the special knowledge of Chaddha, it is for him to prove his version. This has not been done so.
7. a) Shri Kamal Chaddha, importer made his statement in air without substantiating the same and this unlike the income tax authorities is accepted by the adjudicating authority without any application of logic. When he stated that the forgery/manipulation was done by his employees and that too without his knowledge, there had been no statements from the employees who were allegedly involved in the forgery.
b) In fact there had been no reason or motivation for the employees to commit an offence which did not benefit them but their employer.
There is nothing on record to indicate which employees of the importing firm committed forgery/manipulation of invoices. As against this, the adjudicating authority expected of the Department to make verification from the unnamed employees of Chaddha in Dubai on the basis of the averment which have been made before income tax authorities was not worthy of reliance. In this background, the statement of Chaddha does not have evidentiary value and has been rightly rejected by the income tax authorities.
8. a) The Commissioner should have realized that all evidences clearly indicated a well planned and well executed conspiracy to defraud the Indian Govt. by taking undue and wrong export benefits in a fraudulent manner and the Dubai Govt. by evading Customs duty.
The evidences also clearly establish that the exporter and the importer are co-conspirators in the commission of the fraud. This is evident from the fact that both have been actively involved in the commission of the fraud and are beneficiaries of the fraud. The purpose of importer in Dubai namely Kamal Chaddha's statement and that too without any corroborative evidence is to bail out the exporter.
b) These aspects do not seem to have been adequately appreciated by the adjudicating authority and on the contrary the statement of the importer has been used to provide total relief to the exporter.& prayer is made that grounds for confiscation under Section 113 (d) of the Act & imposition of penalty under Section 114 of the Act appears to be justifiable & the Commissioner should have confirmed the allegation contained notice dtd 30.12.97.
2.1 It is on record that a show cause notice dtd 10.1.94 was issued to M/s DOL for an attempt to export Plastic Newar under DEEC scheme on 10 shipping bills by misdeclaring the same as to have been made from HDPE granules & on an overvalued declaration of US 30 lakhs in contravention of Export Trade Control Order (herein after referred to as ETC) under provision of DEEC in collusion with M/s Plastic Associated Plastic Industries Bhavnagar. The provisions of clause 3(3) of Export Trade Control Order (1188) ETC dtd 13.3.88 deemed to be issued under the Foreign Trade (Development Regulation) Act 1992 by virtue of said Act were also invoked. Commissioner did not uphold the charges in the notice & found realization of Foreign Exchange Sales Proceeds remittance having been made through any source other than Banking channels.
2.2 Revenue, not satisfied with this finding of the Commissioner Kandla vide order dtd 18.3.94, entered into a prolonged litigation taking the matter to Tribunal, Supreme Court and back, which are recapitulated as - 22.12.94 Tribunal disposes appeal filed by the department remanding the matter for fresh decision, as reported in 1995 (76) 48.
8.9.95 Supreme Court set aside the Tribunal remand order (1995 (80) ELT 108C) 31.10.95 Tribunal dismisses appeal filed by department (1995 (80 ELT 900) 19.1.96 Supreme Court dismisses department appeal against order dtd 31.10.95 3.9.96 Tribunal rejects departments application for rectifications of mistake.
Directorate of revenue Intelligence, who had handled investigation into this case finally directed all concerned departments including DGFT vide letter dtd 29.10.96 that CBEC on reconsideration has decided that all departments should act in accordance with the decision of the Supreme court dtd 31.7.96 and it appears pursuant to that, as it is on record that Export Incentives accruing to M/s DOL were granted/released. It is also on record that Revenue Secretary vide his affidavit dtd 2.1.97 categorically has averred about consequential relief having been granted to the petitioners (i.e. M/s DOL) by an endorsement of DEEC both on 20.9.96 & an apology was tendered to the apex court for delay in revalidating the Advance License in question.
This affidavit was filed in the matter of contempt petition no 542-543/1990 filed by M/s DOL.
2.3 a) Therefore, inspite of the aforesaid unconditional apology and grant of Export incentives i.e. DEEC claim in the books having been granted to M/s DOL on 20.9.97, the issue of fresh notice dtd 30.12.97 to M/s DOL & Shri V K Gandhi on the Export of very said same 10 Shipping Bills, the subject matter of Export incentives granted under DEEC, to bring in again a charge of i) in para 16 thereof of confiscation liability under Section 113(d) of the Customs Act 1962 for the said goods exported, as per the said 10 shipping bills ii) In para 16.2, penalty under 114 (1) of Customs Act 1962 for export of goods in contravention of FERA 1973, Export Central Order 1988 & Customs Act 1962.
iii) In para 16.3, penalty under Section 114 (i) & under Section 140(1) & (2) of Customs Act 1962 for having exported the goods in violation/contravention of provision of FERA 1973, Export Control Order 1988, & Customs Act 1962.
was issued. These resumed proceedings, on the Respondents, herein, are not permissible in view of the principle of Rejudicate as pleaded by the Respondents before us. The Ld. DR could not submit any material, for lack of instruction to him, as to the reasons for having taken a stand in Contempt petition no 542-543/1996 & granting of Export Entitlements on these 10 shipping Bills & why & how the notice issued now for alleged violations could be upheld, especially in view of the findings in the order dtd 18.3.94 and the findings arrived therein, as regards Foreign Exchange Remittances & on Valuation and that matter having been settled. He relied only on the grounds as taken & the observations of the S.C. as regards issue of Valuation having been kept open.
b). The consultant for the Respondents specifically drew our attention to the conclusions on the self explanatory opinion obtained on this matter, from, none other than, Hon. Shri A H Ahmadi, Former Justice of India specially drawing our attention to following conclusion in the said opinion - "I am, therefore, of the view that the department is barred by the principle of rejudicate from issuing the Second Notice. This is because, the fresh proceedings thereby initiated against the Querist clearly related to the earlier 9 proceedings which had become final and concluded by virtue of the orders of the Supreme Court dtd 19.1.96 and 31.7.96 to effect that the issue of the applicability of Section 14 of the Customs Act to duty free goods was being left open, cannot be understood to mean that the department could initiate, by issuing the second notice despite being aware of the undertaking given by the Revenue Secretary to the Supreme Court, the officers of the Department have aggravated the earlier contempt and are liable to be punished for the same by the Supreme Court" " Based on the above mentioned factors and the fact that the Second Notice traverses the same ground on the first notice, it follows that the principle of rejudicate would prohibit the prosecution of the Querist for the charges revealed in the second Notice." & also as regards the issue of valuation under Section 14 of the Customs Act it...
"... By prohibiting the passing of any order in the rectification proceedings, the supreme Court made it abundantly clear that the issue of valuation under Section 14 of the Customs Act was finally concluded is refer as the Querist was concerned." After having the benefit of the opinion of Ld. Shri Ahmadion the facts in this very issue, which we respectfully adopt and the settled position that akin to the provision of Rejudicata is finality in all legal proceedings, as laid down by the apex court in case of Parashuram Poultry Works USI TO (1977) 106 ITR wherein it was observed by the- "... At the same time, we have to bear in mind that the policy of law is that there must be a point of finality in all legal proceedings, that state issues should not be reactivated beyond a particular stage and that lapse of time must induce repose in and set at rest judicial and quasi judicial controversies as it must in other spheres of human activity." & on considering that the letters & the enquiries, at Port of Destination could have also been obtained, after due diligence even before the first notice was issued which appears to have not been done.
The conduct of Piece meal adjudications under Customs Act are not approved by the apex court, as was held in the case of Mohan Meakin Ltd (2000 (115)ELT 3 (SC) & Following this position in law & on facts in this case, we cannot allow these proceedings to continue. Investigators cannot be allowed to proceed on to build up case piece by piece, after the notice has replied to a notice and an adjudicated matter is settled qua the said parties. These proceedings as resumed initiations were void at aoinitio. They cannot be proceeded with - i) the Commissioner while dropping the proceedings has upheld the justification of invoking the provisions of Section 14(1) however he has found that no case was made out to hold that the goods exported by M/s DOL were grossly overvalued. He has observed that evidence of Shri Kamal Chadda of Dubai, who imported the Cargo had not been challenged by Revenue and there was no bar on DRI officers to have examined him, as was evidence his affidavit in Income Tax proceedings at Delhi before the Income Tax Officer. That misdeclaration at Dubai was the effort & result of his employees & that Testimony was accepted by I. Tax Officer & there was no reason arrived & pleaded herein to reject the same when Contra evidence of any kind of & by recording Kamal Chaddha's further explanation & his employees statements were not brought on record.
ii) When full remittance received through Banking channels is being upheld, the declarations of under valuation made to Dubai Customs cannot be a reason to arrive at bringing home the charge on the present appellants of having knowledge thereto. The forging documents of the Delhi Chamber Officials by the appellants cannot be conclusively accepted. If the appellants have given duplicate sets of invoices showing different values, that surely cannot be an offence of misdeclaration on customs Documents in India. Since it is not admitted by the exporters that the lower values on such invoices was the Transaction Value. The price as shown at higher levels are claimed, declared & confirmed to be received via Banking Channels is a fact on record. The fact of duplicate sets being in existence is only a presumption against the respondents, if at all, they have supplied the same. It is common knowledge that fake letter heads, can be duplicated by Computers/Scanners & there is no material in the grounds urged before us to arrive at that, as per forensic evidence, etc they are handiwork of & issued by M/s DOL especially the invoices with lower prices or they were within the knowledge of M/s DOL.
iii) The gaps & flaws in the re-enquiry made have been observed by the Commissioner which have led him to drop the proceedings & that cannot be allowed to be filed in by this appeal.
2.5 When in law & on facts, proceedings are found to be not permissible, being void ab inito & on merits there are no reasons to uphold the order of dropping the proceedings we find no merits in the grounds taken to allow these appeals.