2. I have carefully considered the submissions made by both sides. The case facts have been narrated in detail in the order passed by Hon'ble Member (Judicial), therefore they need not be reiterated once again.
The difference of opinion to resolve in the instant case as to whether the penalties as reduced by Hon'ble Member (Judicial) or the penalties confirmed by Hon'ble Member (Technical) are to be accepted.
3. The penalties were imposed on the appellants under Section 112(a) of the Custom Act, 1962, which provides that any person who, in relation to any goods, does or omits to do any act, which act or omission would render such goods liable to confiscation under Section 112 or abets the doing or omission of such an act is liable to a penalty. The rough diamonds imported earlier are held to be liable for confiscation under Section 111(d) of the Customs Act, 1962. Thus, the action or omission is in claiming clearances of rough diamonds on the basis of forged licenses, and therefore the question is whether the appellants had any malafide intention in claiming clearances against the alleged forged licenses and whether they had any role in the forgery of licenses and further whether there are any extenuating circumstances warranting reduction in penalties imposed by learned Commissioner in the impugned order has to be examined.
i) Shri. Hiralal Jain has consistently in his statements recorded under Section 108 of the Customs Act stated that he has purchased forged licenses through Shri. Gautam Bagari.
ii) The ld. Commissioner did not accept the explanation given by Shri. Hiralal Jain.
iii) No Show-Cause-Notice was issued to Shri. Gautam Bagari though indicated by Shri. Hiralal Jain, in his statements and the ld. Commissioner relied upon these statements to hold guilty but the Customs Authorities in the criminal case lodged against Shri.
Hiralal Jain in respect of missing blank forms ended in acquittal and no appeal has been filed.
5. The ld. counsel for the appellants has raised the following contentions: (a) None of the persons were examined to establish the alleged forgery of the licenses.
iii) any other Government agencies to show that all the past clearances were made against the forged licenses.
6. Further, it is pointed out that even the letter of DGFT (produced for perusal) cannot conclusively establish the evidence of past clearances against forged licenses. According to him, the ld. Member (Technical) had completely ignored the vital submissions made and projected the cases as to what the adjudicating authority ought to have done. In this context, he relied upon the para 29 of decision in the case of Collector of Customs v. K. Hargovindas & Co.
Para 29. "As indicated herein above, fixing the quantum of penalty is within the discretion of the adjudicating authority, and it is not open to the Tribunal to examine the issue from the angle as to what it would have thought to be adequate penalty, if it was sitting as the adjudicating authority. It has only to consider whether the discretion has been properly exercised and whether the penalty imposed is disproportionate. Examining the quantum of penalty in the light of the et principles discussed, herein above, there does not appear any justifiable reason to interfere with the penalty amount also and as such I agree with the findings given by brother Shri R. Jayaraman.
7. Finally the contention is that the appellants (Appeal No. 629, 634 & 721/03) are innocents and no malafide intention can be attributed to them.
8. The ld. DR Shri R.B. Pardesi contends that there is no procedure as such where the DGFT is required to do an endorsement of licenses which are freely transferable as per para 8.3 of EXIM POLICY. It is further added that even the DGFT endorsement has been forged. Imports are made on the basis of the forgery licenses. Therefore, goods are liable for confiscation.
9. This reference is made to third member for resolving the difference of the opinion with regard to the quantum of the penalty as recorded by the both ld. members of the bench. At this stage, I am not expected to appraise the evidence on record and come to a conclusion as to whether the Department had established the forgery or not. What is relevant is whether the appellants were involved in the forgery of the licenses and whether there was any malafide intention on their part could be culled out from the record. The statement of Shri. Hiralal Jain recorded on 01.03.2001 shows that he used to purchase 3 to 4 licenses a day from the open market. As against such large quantity of import licenses purchased only few of them are held to be forged. The Hon'ble Member(Judicial) in para 19 of his order has observed that Customs Officers did not detect the fraud. Further M/s. D.S. Brothers who had purchased rough Diamonds from M/s. Hindustan Diamond Co. Ltd., used the same forged licenses and DGFT could not detect forged licenses. Thus Customs and DGFT could not detect the forged licenses, how would the appellants comes to know that the import licenses were forged. It is further on record that the appellants had produced licenses worth Rs. 32.00 Crores which were not returned to them and thus they were deprived of the same. It is also seen from the record that the learned Commissioner has not held that there was a malafide intention on the part of the appellants and they are found to be bonafide purchaser for value. In normal course of business, they have purchased large number of licenses in the open market for clearances of rough diamonds. It is to be noted such licenses were freely available in the market at very nominal premium and that rough diamonds ultimately have been exported after processing and have not been diverted in domestic market.
Further, there was no Custom duty leviable on imported rough diamonds and the Appellants herein already suffered financially loss because of seizure of rough diamonds since April 2001. These are extenuating circumstances to be considered in resolving the difference of opinion as regards to the penalties imposed.
10. It is a contention of the ld. DR that the penalty can be imposed even when goods confiscated are not available. He relied upon the following case laws: i) Dada Pharma Pvt. Ltd. v. Secretary to Govt. of India 2000 (126) ELT 535 (Mad.) He also draws attention to the observations made by ld. Member (Technical) in para 23 of the order justifying the penal action for importing the goods against forged licenses.
11. The ld. counsel for the appellants replied that the above case law cited by the Ld DR is not applicable to the facts of the case except an element of mens rea.
12. It is well settled principle in law that the quantum of penalty has to be proportionate to the role played by an individual. There is no finding by the ld. Commissioner that the appellants had any malafide intention that there is no evidence on record that the appellants had knowledge about the dubious sources from whom they have purchased licenses, particularly when the DGFT and Customs have allowed clearance of rough diamonds believing that the purchased licenses were genuine.
Further, I am to observe that the question of showing due diligence by the appellants is far from the factual position, when they were not party to forgery and they had no malafide intention. In the light of aforesaid discussion, I am of the considered opinion that this is a fit case where penalties are to be reduced. The higher penalties are no way justified from the case point of view and it should not be a substitute for redemption fine under Section 125 of Customs Act, 1962, as per the following decisions:H.C.L. Ltd. v. CC, Calcutta 13. Therefore, in the light of aforesaid discussion, I find that the penalties reduced by Hon'ble Member (Judicial) on M/s.Deepali Exports, M/s.Vaibhav Exports &, M/s.Pushpak Impex and setting aside the penalties of M/s.Kiran Exports, M/s.Munjani Exports and M/s.D.S.Brothers is justified and would meet the ends of justice. Accordingly I agree with the order passed by the Hon'ble Member (Judicial).
In view of the fact that the third member has agreed with the order recorded by the Member (Judicial). The appeals are disposed of in terms of the majority order recorded by Member (Judicial).
1. These appeals arise out of order dated 11.7.2003 passed by the Commissioner ordering absolute confiscation of rough diamonds imported by M/s Vijaybhav and M/s Deepali Exports. He further held that rough diamonds imported earlier on the strength of forged licences are liable to be confiscated under Section 111(d) of the Customs Act 1962.
However, the goods are not confiscated as they are not available for confiscation. He imposed penalty on M/s Vijaybhav, M/s Deepali Exports, M/s Vaibhav Exports & M/s Pushpak Impex and separate penalty on proprietors. Penalties are also imposed on M/s Kiran Exports, M/s Munjani Brothers & M/s D.S. Brothers under Section 112(a) of the said Act.
2. The brief facts are that M/s Vijaybhav, M/s Deepali Exports, M/s Vaibhav Exports and M/s Pushpak Impex were importing rough diamonds and getting the same cleared on the strength of replenishment licence. M/s Vijaybhav and M/s Deepali Exports had filed bills of entries seeking clearance against R.E.P.Licences and during scrutiny of the R.E.P.Licences it was noticed that R.E.P.Licence No. 03345531 dated 21.9.1999 issued in favour of M/s Nilesh Diamonds was already fully utilised. Therefore, the clearance was kept in abeyance. While verifying the licence in detail, a doubt was raised regarding genuineness of licence No. 03348094 dated 24.12.1999 transferred in favour of M/s Deepali Exports. On a reference made to Jt.DGFT Mumbai, he confirmed that the licences issued to M/s Nilesh Diamond for the value shown in Dollar and Rupees is not correct. M/s Vijaybhav and M/s Deepali Exports vide their letter dated 12.2.2001, 13.2.01 & 14.2.01 submitted 23 fresh REP licences collectively valued Rs. 32,23,64,073/- which were duly transferred to them in order to cover the consignments pending for clearance and also consignments cleared earlier against the import licences. They also requested to clear their consignment against 23 fresh REP licences. Thereafter Customs Authorities searched the residential premises belonging to M/s Vijaybhav, M/s Deepali Exports and the statement of no. of persons were recorded. Rough diamonds imported by M/s Deepali Exports and M/s Vijaybhav were seized under the provisions of said Act on 28.2.2001.
3. Three more consignments of rough diamonds in the name of M/s Deepali Exports and M/s Vijaybhav were received by the Custodian of MMTC and DPC for which no Bill of Entries were filed for clearance of the same.
These consignments were seized on 16.4.2001 under the bonafide belief that the said goods were liable to confiscation under Section 111(d) of the said Act.
4. Shri Hiralal Jain filed an affidavit on 3.4.2001 in the Chief Metropolitan Magistrate Court Esplanade showing that he had purchased several import licences from Shri Gautam Bagri for Shri Rajesh Jain, Shri Gyanchand Jain Hiralal alias Ajit Jain & Shri Kamlesh Kumar Khicha. That he subsequently learnt after being resisted when the licences procured by Shri Gautam Bagri were in fact bogus and we have no idea whatsoever, as to whether the said licences were in any manner not genuine. On 3.2.01 Shri Rajesh Jain has retracted his statement before the court of Additional Chief Metropolitan Magistrate, Esplanade. Shri Gyanchand Jain also vide his letter dated 2.3.2001 retracted his statement before the Hon'ble Additional Chief Metropolitan Magistrate, Esplanade.
Thereafter, show cause notice dated 24.8.2001 was issued to M/s Vijaybhav and others proposing confiscation of the consignment of rough diamonds under seizure and also rough diamond cleared earlier in the past and proposing penalty on various persons. There-after ld.Commissioner passed the order dated 11.7.03 confirming allegation in the show cause notice ordering absolutely confiscation of seized rough diamonds and imposed penalties.
We have heard the argument in detail. Ld.Commissioner has framed the following issues for determination in the impugned order: a) Whether the 5 consignments of rough diamonds under seizure sought to be cleared under Bills of Entries on the basis of forged replenishment licences are liable to confiscation or not.
b) Whether 3 consignments of rough diamonds imported in the name of M/s Deepali Exports and 1 consignment by M/s Vijaybhav for which no bills of entries are filed, are liable to confiscation or not.
c) Whether the foreign supplier is entitled for re-shipment in view of the importer's subsequent disclaiming the title of goods.
d) Whether the goods cleared in the past on the basis of forged replenishment licences by M/s Vijaybhav, M/s Deepali Exports, M/s Vaibhav Exports and M/s Pushpak Impex are liable for confiscation or not.
e) Whether the goods imported by other firms i.e. M/s Kiran Exports, M/s Munjani Brothers, and M/s D.S.Brothers on the basis of forged licences purchased by them are liable to confiscation or not.
f) Whether the importers and the individuals concerned in the fraudulent clearances are liable to penalty under the provision of the said Act.
5. The ld.Counsel for the appellant contented that the Customs does not have any case to sustain the confiscation of the 5 consignments for which substituted licences were produced much before it's seizure and were valid on the date of shipment. The allegation of the Customs is that the appellants are party to the forgery of the forged licences issued by the DGFT and the allegation sought to be supported by showing alleged recovery of 2 blank licences found from the premises of one of the appellants. However, Hon'ble Chief Metropolitan Magistrate, Esplanade Court, Mumbai, acquitted the appellants vide order dated 11.3.2003 by holding that recovery of blank licences found from the appellants' premises is not proved, as well as the 99 blank licences recovered is also not proved against the appellants. Act of forgery is not proved and no appeal has been filed against the Hon. Chief Metropolitan Magistrate's Order. On the other hand, the D.R. contented that Shri Hiralal Jain alias Ajit Jain proprietor of M/s Vaibhav Exports is the master forger and had imported in the past also 700 and odd consignments between 1999 and 2001 against forged licences. This is proved by letter dated 14.2.2001 from the DGFT.6. We find that under the relevant period, as per Exim Policy, the import of rough diamonds was restricted and the import was permitted only on the strength of R.E.P licences. Rough diamonds valued at Rs. 59,26,545/- CIF against Bill of Entry No. 1020271 dated 3.2.2001 was sought against 2 replenishment Licences by M/s Vijaybhav and M/s Deepali Exports and filed Bill of Entry No. 100286 dated 15.2.01 for rough diamonds valued at Rs. 29,41,171/-, Bill of Entry No. 100389 dated 16.2.01 for rough diamond valued at Rs. 65,90,964/- CIF, Bill of Entry No. 100446 dated 7.2.01 for a value of Rs. 32,86,232/- CIF and Bill of Entry No. 100450 dated 7.2.01 for rough diamonds valued at Rs. 99,90,261/- CIF for clearance on the strength of replenishment Licences dated 21.9.1991 and 24.12.1999. Investigations had clearly established all the licences presented by the importer were forged, thus it is clear attempt to seek clearance of imported rough diamonds against the forged licence and, therefore, the impugned goods are liable to confiscation under Section 111(d) of the said Act. Irrespective of the facts that subsequently Rs. 32 Crores worth licences were produced at that moment, clearance was sought against the forged licences by filing Bill of Entries and attempted to clear imported goods illegally is established.
7. The ld.Counsel for the appellants had submitted that the appellants had furnished licences worth Rs. 32 Crores on 12.12.01. Import had taken place prior to the seizure of rough diamonds. Appellants' claim in the limelight of Tribunal judgment in the case of H. Kumar Gems v.Commissioner of Customs, Ahmedabad reported in 2001 (137) ELT Page-61 Tribunal Mumbai. However, we agree with ld.Commissioner that the appellant cannot claim benefit for the goods before the tribunal.
Appellant had no knowledge of the alleged forgery. In the appeal Hiralal alias Ajit Jain in his statement recorded on 28.2.2001 had stated that he was offered by Shri Gautam Bagri to join the business of forged licences in order to compensate the loss incurred in the share business. He has received forged licences from Shri Gautam Bagri. We agree with the ld.Commissioner that the 5 consignments of rough diamonds are liable to confiscation for an attempt to import against forged import licence under Section 111(d) of the said Act. The ld.Commissioner has ordered absolute confiscation of the rough diamonds imported by M/s Vijaybhav valued at Rs. 59,26,545/- and diamonds valued at Rs. 2,28,00,628/- imported by M/s Deepali Exports. As per Section 125 of the said Act officer adjudging confiscation may give to the owner of the goods or where such owner is not known, the person from whose possession, the custody of such goods have been seized, an option to pay in lieu of confiscation of such fine, as the said officer thinks fit. Section 125 provides that fine shall not exceed the market value of the goods in the case of the imported goods less the duty chargeable thereon. Discounting the order, redemption is there when the import is prohibited in the said Act or any other law for the time being in force. We find that though there was a restriction for import of rough diamonds but there was no absolute prohibition and rough diamonds could be imported against REP Licences which were available at a nominal premium ranging between 1.75% to 4.75% as recorded in para 74 of the impugned order.
Further the appellant had produced REP licences worth Rs. 32 crores which were kept by the Customs and not returned to them inspite of all the requesta for return of these licences vide their letter dated 15.6.2001. Further it is a well settled principle that the quantum of redemption fine is fixed to wipe out the margin of profit which the importer would have earned by importing goods without licence. The appellant initially would have paid a premium to procure licences worth Rs. 32 Crores and, therefore, we hold that this is a fit case where the appellants should be given a chance to redeem the confiscated goods on payment of redemption fine. As the REP licences were freely available at an average premium of 3% of CIF value and the appellants had already submitted, licences worth Rs. 32 crores which have not been returned to them and now their validity period would have expired. In the interest of justice, we consider the redemption fine of 3% on CIF value and accordingly give M/s Vijaybhav, the appellants an option to redeem rough diamonds weighing 1001.410 carrots valued at Rs. 59,26,245/- on payment of redemption fine of Rs. 1,80,000/-. Similarly M/s Deepali Exports also be given the option of redemption for confiscated rough diamonds weighing 1494.00 cts valued at Rs. 2,28,08,628/- CIF value against payment of redemption fine of Rs. 6,50,000/-. While they are having redemption fine, we have also kept in mind the fact that licences worth Rs. 32 crores were submitted by the appellants and the confiscated diamonds are already in the custody of the Department since 28.2.2001.
While giving the option of redemption of the confiscated diamonds, we have also taken into consideration the fact that Shri Hiralal Jain consistently said during recording of the statement under Section 108 of the said Act that he had purchased forged licences through Shri Gautam Bagri in lieu of huge payment, the ld.Commissioner does not accept his explanation as seen in para 103 of the impugned order.
However, when the ld.Commissioner accepted guilt of Shri Hiralal Jain on the basis of his own statement that he was aware of the forged nature of the licences, his other part of the statement implicating that Shri Gautam Bagri has been overlooked as no show cause notice was issued to Shri Gautam Bagri. Further in part 176 of the impugned order, the ld.Commissioner's reference to the F.I.R. filed by DGFT pertaining to the missing blank forms and states that these are crucial evidence on the involvement of Shri Hiralal Jain in the act of forgery. However, the Hon'ble Chief Metropolitan Magistrate, Esplanade Court, Mumbai vide his order dated 11.3.2003 has acquitted Shri Hiralal Jain and DGFT has not filed any appeal. Ld.Commissioner further observed in para 75 of the impugned order that the fate of the original licences referred in para 74 of the impugned order which were procured by various appellants are unknown. Thus, there is no conclusive proof that Shri Ajit Jain alias Shri Hiralal Jain is involved in the act of forgery as observed by ld.Commissioner in para 76 and 106 of the impugned order.
The second issue framed by ld.Commissioner is whether the 3 consignments of rough diamonds imported by M/s Deepali Exports and M/s Vijaybhav which was seized on 16.4.2001 when no Bill of Entries were filed in respect of these 3 consignments. The ld. Commissioner has held that these consignments are liable to confiscation under Section 111(d) of the said Act by holding that M/s Deepali Exports and M/s Vijaybhav are not bonafide importers and that the goods have been disputed by them that they were owner and possession of the proper import licences and had intended to clear the goods on the strength of forged licence and therefore the goods remain tainted irrespective of the fact whether the bill of entries is filed or otherwise. We have given a considerable thought regarding this issue as to whether the 3 consignments would be liable to confiscation under Section 111(d) of the said Act. When admittedly no bill of entries were filed and thus the appellants had no claim against any particular import licence, as per Section 111(d) "Any goods which are imported or, admitted to be imported contrary to any prohibition imposed by Customs Act or any other law for the time being in force are liable to confiscation". REP Licences were freely available in the market at low premium ranging between 1.75% and 4.75% as admitted in the impugned order. The question of clearance of rough diamonds against a particular import licence arises only at the time of filing of bill of entries when licence No. and copies of such licence have to be submitted. As per the statement of Shri Hiralal Jain recorded on 1.3.2001 referred to in para 30 of the impugned order he used to purchase on an average 3 to 4 licences a day from the open market and some of which were utilised by M/s Vijaybhav and M/s Deepali Exports. This statement makes it clear that Shri Hiralal Jam was dealing with no. of licences. Investigation has revealed as observed in para-24 of the impugned order that M/s Vijaybhav has used 29 forged licences and M/s Deepali Exports had imported under 28 forged licences.
Thus it is not the case of the department that all the REP licences produced for clearance or rough diamonds were forged. In the case of above clearance the REP licences had been accepted by the Customs Authorities after scrutiny and allowed clearances. Customs officers are required to verify the genuineness of the REP licences at the time of scrutiny and no such Customs Officers have been issued show cause notice for collusion with the importers. Therefore, it cannot be presumed that even in respect of 3 consignments, at the time of filing bill of entries, the importers might have claimed clearances against forged REP licences, in fact no bill of entries have been filed. This particularly shows that the group of these appellants have submitted REP licences worth Rs. 32 crores and they have been repeatedly asking the department to allow clearance against these licences. Therefore, it cannot be held that an attempt was made by the appellants to clear the 3 consignments against forged licences and therefore the subject goods are not liable to confiscation under Section 111(d) of the said Act.
8. The ld.Commissioner in para 88 of the impugned order observes that M/s Deepali Exports and M/s Vijaybhav are not bonafide importers and that the goods have been disowned by them. As per Section 2(26) an importer "in relation to any goods at any time between the importation and the time when they are cleared for home consumption includes any owner or any person holding himself ought to be as an importer. "Thus, importer need not to be owner of the goods as per the definition and law because the proprietors of these 2 firms were not the defacto owners does not mean that they are not bonafide importers". As per the statement of Shri Gyanchand Jain, the Proprietor of M/s Vijaybhav, he was himself the Proprietor of M/s Vijaybhav. Similarly, as per the statement of Shri Rajesh Jain, he had filed 4 bills of entries in the name of M/s Deepali Exports and had submitted 2 licences. Thus both the proprietors have claimed to be importers before the Customs and they have been accepted as importers in the case of past clearances.
9. We further find that in the reply to the show cause notice submitted by these 2 appellants they have contended that seized goods are not liable to confiscation and they had submitted licences believing they are valid and had requested dropping of proceeding and had also requested for release of the said goods against licences already produced. Thus, these two appellants had claimed the ownership of these consignments and, therefore, the ld.Commissioner is not correct in holding confiscation of these 3 consignments, on the ground that the 2 appellants are not genuine importers and that they have not claimed ownership. Therefore, we order that these 3 consignments imported by M/s Deepali Exports and M/s Vijaybhav are not liable to confiscation under Section 111(d) of the said Act. However, clearance of the said 3 consignments should be considered against the REP licences already submitted by them to the department after verifying the genuineness of the REP licences.
10. The ld.Commissioner has further held that consignment of 81.22 Cts exported by M/s Diaji Jewells, Belgium, and imported by M/s Deepali Exports is liable to confiscation under Section 111(d) of the said Act.
This consignment was seized on 16.4.2001 and no payment was made for the consignment to M/s Diaji Jewels, Belgium. However, as there is no appeal by M/s Diaji Jewels, Belgium against Commissioner's order and the same stands un-challenged and hence we are not required to give any finding on this point.
11. Ld.Commissioner has held that the rough diamonds imported in the past by M/s Deepali Exports, M/s Vaibhav Exports and M/s Pushpak Impex are liable to confiscation but the goods are not available for confiscation and had imposed penalty on M/s Deepali Exports, Vaibhav Exports, and M/s Pushpak Impex and also individual penalties on Shri Hiralal Jain, Shri Kamlesh Khicha, Shri Gyanchand Jain and Shri Rajesh Jain. Ld.Commissioner in para 92 of the impugned order has observed that investigation has revealed that all the appellants had sought in the past clearance for rough diamonds on the strength of 29 forged licences by M/s Vijaybhav, 28 forged licences by M/s Deepali Exports, 4 forged licences by Vaibhav Exports and that they were fully aware that the licences presented by them before the Customs authorities were forged. We agree with the Ld.Commissioner that Shri Kamlesh Kumar Khicha had stated in his statement that the licences presented were forged as is supported by a letter from DGFT as recorded in para 74 of the impugned order. Therefore, we agree with ld.Commissioner that the rough diamonds imported against forged licences are liable to confiscation. The said goods are not available for confiscation and, therefore, the Firms are liable to penalty under Section 111(d) of the said Act. However, it is well settled principle in law that no separate penalty can be imposed on the proprietor and the proprietary Firms, as in law both are one and the same as held by the tribunal in the case of Paragrati Press v. C.C.Delhi 1994 ELT Page-20 Tribunal. Therefore, we are folding that no separate penalties would be leviable on the proprietors and, therefore, appeals in this regard succeed.
12. Regarding quantum of penalty imposed on the Firms we find that there is no clear evidence available regarding involvement in forgery of Shri Hiralal alias Ajit Jain proprietor of M/s Vaibhav Exports and others as observed by us earlier, when the Hon'ble Chief Metropolitan Magistrate, Esplanade Court, Mumbai, vide order dated 11.2.2003 has acquitted them.
13. Further we also observe that the REP licences were freely available ha the market at a premium ranging from 1.75 % to 4.75% and the maximum benefit they would have availed upto 3% of the CIF value of the imports. We also take into consideration the fact that the appellants had produced licences worth Rs. 32 Crores to the department during investigation which were not returned to them. Therefore, we think in the interest of justice the penalty should be reduced and accordingly we reduce penalty to Rs. 10,00,000/- (Rs. Ten Lakhs only) on M/s Deepali Exports and Rs. 8,00,000/- (Rs. Eight Lakhs only) on M/s Vaibhav Exports and Rs. 10,00,000/- (Rupees Ten Lakhs only) on M/s Pushpak Impex.
14. Ld.Commissioner in para 96 of the impugned order has dealt with the appeals of M/s D.S.Brothers, M/s Kiran Exports and M/s Munjani Brothers, ld.Commissioner has held that the rough diamond imported by these Firms are liable to confiscation under Section 111(d) of the said Act. The licence produced were forged and clearance effected on the forged licences which are not disputed. The appellants have argued that there is no malafide intention on their part and they have purchased rough diamond from M/s Hindustan Diamond Co. Ltd, A Government of India undertaking. The ld.Commissioner does not dispute that there was no malafide intention on the part of these appellants. However, he has held there could be situation when mensrea is not required for imposition of penalty. We find that penalty is under Section 112(a) of the said Act on these 3 appellants 112(a) would apply to person who in relation to any goods does or omits to do any act which act or omission would render such goods liable to confiscation under Section 111 or abets in doing or omission of such act. The case of the appellants is that in claiming clearance of rough diamonds against the forged licences they did not know that they were forged. Thus merely finding forged licences without any knowledge would not make these appellants liable to penalty under Section 112(a), particularly when ld.Commissioner does not hold that there was a malafide intention on their part and when these appellants are bonafide purchasers for value.
Therefore, we hold that M/s Kiran Exports, Munjani Brothers & M/s D.S.Brothers are not liable to penalty and, therefore, appeals are allowed.
15. I have carefully perused the proposed order recorded by the Hon'ble Member (Judicial). The main facts of the case as recorded in Para 49 of the impugned order are as follows: (i) Rough diamonds valued at Rs. 1,44,39,89,912/- (CIF) were imported by M/s Vijaybhav (under 288 Bills of Entry) on the basis of 29 forged licences.
(ii) Rough diamonds valued at Rs. 1,57,62,25,053/- (CIF) were imported by M/s Deepali Exports (under 313 Bills of Entry) on the strength of 28 forged licences debited for Rs. 1, 54,82,08,170.70.
(iii) Rough diamonds valued at Rs. 13,99,96,773/- (CIF) were imported by M/s Pushpak Impex (under 22 Bills of Entry) on the strength of 4 forged licences debited for Rs. 14,02,25,202/-.
(iv) Rough diamonds valued at Rs. 12,02,65,343/- (CIF) were imported by M/s Vaibhav Exports (under 26 Bills of Entry) on the strength of 4 forged licences debited for Rs. 11,98,06,198/-.
(v) Rough diamonds valued at Rs. 3,52,72,152/- (CIF) were imported by M/s Kiran Exports (under 5 Bills of Entry) on the strength of one forged licence No. 03346608 dated 29.10.99 debited for Rs. 3,48,80,000/-.
(vi) Rough diamonds valued at Rs. 7,08,85,556/- (CIF) were imported by M/s Munjani Brothers (under 8 Bills of Entry) on the strength of one forged licence No. 03332549 dated 25.9.98 debited for Rs. 7,08,17,450/-.
(vii) Rough diamonds valued at Rs. 1,86,33,938/- (CIF) were purchased by M/s D.S. Brothers from M/s Hindustan Diamond Co. Ltd. on the strength of one forged licence No. 03332549 dated 25.9.98.
From the above, it is seen that there has been imports of Rough diamonds under 662 Bills of Entry totally valued at over Rs. 340 crores on the strength of 68 forged licences. In addition, the department has seized rough diamonds valued at Rs. 59,26,545/-, Rs. 75,41,148/-, Rs. 2,28,08,628/- and Rs. 2,05,33,595/- as recorded in Para 50 of the impugned order. The total value of rough diamonds seized comes to Rs. 5,68,09,916/-.
16. The adjudicating Commissioner has confiscated the seized rough diamonds valued at Rs. 5,68,09,916/-. He has also held that rough diamonds valued over Rs. 340 crores imported against forged licences to be liable for confiscation. He has taken into consideration that the said rough diamonds already cleared against forged licences are not available for confiscation and hence has imposed the following penalties: 17. The proposed order recorded above upholds the confiscation of the seized diamonds but allows redemption of rough diamonds valued at Rs. 59,26,545/- on a redemption fine of Rs. 1.8 lakhs and redemption of rough diamonds valued at Rs. 2.28 crores on payment of a redemption fine of Rs. 6.5 lakhs. It also proposes that three consignments of rough diamonds seized on 16.4.2001 for which no Bills of Entry were filed are not liable to confiscation. The order also proposes reduction in the penalties as follows: The penalties on Shri Gyanchand Jain, Shri Hiralal Uttamchand Jain, Shri Kamlesh Khicha and Shri Rajesh Jain have been set aside as they were respectively proprietors of M/s Vijaybhav, M/s Vaibhav Exports, M/s Pushpak Impex and M/s Deepali Exports. The penalties on M/s D.S.Brothers, M/s Kiran Exports and M/s Munjani Brothers have also been set aside.
18. At the material time, rough diamonds were exempted from duty.
However, they were allowed to be imported against REP licences. The Govt. policy therefore clearly established a clear linkage between import of rough diamonds and export of processed (cut and polished) diamonds. In effect the policy prohibited import of rough diamonds to be used in processing for domestic consumption. The appellant's action in importing over Rs. 340 crores of rough diamonds against forged licences clearly defeated the Govt. policy apart from causing illegal drain of foreign exchange.
19. The forged licences were prepared on actual licence papers stolen from the DGFT office and were prepared with numbers of real licences but with inflated values. Obviously, it was difficult for the customs officials to detect the fraud initially, but ultimately they have only detected the fraud when they came across the real licences with the correct value and the fraudulently prepared licences with much higher value, both with the same licence number, when both were presented near about the same time for debiting the licences against import clearances.
20. It tells its own story that the DGFT officials did not discover theft of licence papers from their office till customs officials pointed out about discovery of such paper being used in the fraud and as pointed out by Hon'ble Member (J), they did not file any appeal against acquittal in the forgery case. However, the case before us is not the forgery itself but clearances of imported cargo against forged licences which have not been actually issued by the competent DGFT authorities. It is now settled law that when imports are permitted subject to some restriction, non-compliance with such restriction would attract confiscation and penal liability provided for in respect of prohibited goods. In Sheikh Mohd. Omer v. CC, Calcutta 1983 (13) ELT 1439 (SC), the Hon'ble Supreme Court has clearly held that the word 'prohibition' in Section 111(d) of the Customs Act, 1962 means all types of prohibitions including restriction, which is one type of prohibition.
21. I agree with the Hon'ble Member (J) that separate penalties on the proprietors are not warranted. I also agree with him that benefits to the extent of 3% have accrued to the appellants in respect of imports made by them using forged licences. Hence keeping in view such clearances already effected by the appellants, I am of the view that the following penalties would be justified (calculated at 3% of clearance value) particularly when the goods are not available for confiscation and imposition of redemption fine: 22. However, since the adjudicating Commissioner has imposed penalties of lower amounts as indicated at paragraph 16 above on appellants at Sl. Nos. (i), (ii), (v), (vi) and (vii) above, I confirm such lower amounts imposed by the adjudicating Commissioner in the absence of any appeal by the Revenue. As regards, appellants at Sl. Nos. (iii) and (iv) above, I reduce the penalties imposed on them to Rs. 42 lakhs and Rs. 36 lakhs respectively as indicated in paragraph 21 above.
23. While passing the above order, I have taken into account the fact that the purchasers of forged licences have to face the consequences of not exercising due diligence while obtaining such licences from dubious sources and that they are liable to penal action for importing against such forged licences under the customs law while it is upto them to seek compensation in appropriate courts of law against persons who have sold them such forged licences.
1. The following difference of opinion has arisen between Member (Judicial) and Member (Technical): (a) Whether the penalties as reduced by the Member (J) in the order recorded by him are to be accepted (b) the penalties as confirmed and imposed by the Member (T) are to be accepted.
2. The registry may take further action in the matter as per the provisions of Section 129C(5) of the Customs Act, 1962.