Full Judgment
2. The facts of the case are that the applicant Tex-Age has exported ready-made garments from Nhava Sheva through Port under claim of drawback and DEPB Scheme, which on subsequent intelligence and investigation were found to be highly over-valued and accordingly, Show Cause Notices were issued seeking to redetermine the PMV grossly misdeclared and recovered back the duty drawback sanctioned and paid and to deny the DPEB credit along with proposal for confiscation of goods already exported and imposition of penalties under Section 114(i)and (iii) of the Customs Act, 1962.
3. The Show Cause Notice was based on the evidence in the form of statements recorded from the supplier of fabrics and garments to M/s Tex-Age and the declarations made by M/s Tex-Age to Indo-Arab Chamber of Commerce which showed that there was a vast difference between the prices declared to Indo-Arab Chamber of Commerce and the purchase bills found in the possession of the suppliers of the goods and their statements that the goods were highly over invoiced and that there were no written orders, nor any purchase bills were issued, and that the purchase bills were generated only after the investigation by DRI was started. Further, it came to the notice that though the exports were made to countries other than Dubai i.e. Netherlands, Australia etc invariably in all the cases, the goods were off loaded at Dubai and cleared to firms which on investigation were found to be belonging to the exporters themselves. This was confirmed from the enquiries made from Consulate General of India, Dubai and from the visiting cards found in the premises of M/s Mohd Essa Al Marri Trading Est., Dubai on which the name of Satish Choudhary was printed & was actively associated with M/s Tex-Age. Evidence was also gathered during the search of the office premises of one of the firms of Subhash Choudhary i.e. M/s Master Forms Pvt. Ltd., where two sets of invoices were recovered, one showing value at Rs. 6/- per piece whereas the value declared in the Shipping Bill was US$ 2 per piece. For procurement of readymade garments, payments were made by cheques, but the same were discounted by two to three persons. Based on the above evidence, total FOB amounting to Rs. 10,53,40,623/- declared for the purpose of drawback was revised to Rs. 75,81,720/- and the PMV was revised to 60,65,376/- in respect of 69 Shipping Bills. Similarly in respect of DEPB Shipping Bills PMV was revised to Rs. 24,45,965/-. The Commissioner demanded back the drawback amount already paid amounting to Rs. 1,21,73,997/- and Rs. 2,82,080/- from M/s Tex-Age and rejected the DEPB credit of Rs. 95,85,068/-. These goods were also ordered to be confiscated under Section 113(d) & (i) of the Customs Act, 1962.
However the goods were not available for confiscation. Penalties of the amounts mentioned in the order above were imposed on the various applicants.
4. The Ld Advocate Shri Sujay Kantawala, appearing for M/s Tex-Age, Satish Choudhary, Subhash Choudhary, M/s Awin Exim Company, M/s Ekta Exports, submitted that in all these cases the goods were exported, after examination by the Customs authorities and as per the examination reports the PMV declared by them were found to be fair. There is no charge of collusion of the officers with the applicants, nor officers have been made party to the Show Cause Notice. No action has been initiated against them. In view of the same, it has to be taken that the goods were properly examined and found according to their declarations and therefore misdeclaration of value cannot be alleged against them. It was submitted that in the present case, no market enquiry was conducted, nor any sample shown to any experts to determine the market value and the entire case is based on the statements of some of the suppliers who have retracted their statements and whose cross examination was not allowed. They refer to the decision of the Tribunal (Order No A-704-713/WZB/2006/CSTB dated 5.5.06 wherein, in para 7 the Bench has observed that the charge of over valuation is not sustainable in the absence of any satisfactory evidence to establish that local market value was less than the declared value and full FOB value as declared was received by the appellants, and further there was no evidence to show any money laundering. He also referred to the Tribunal decision in Cannon Steel 2002 (145) ELT 490, wherein the Tribunal has held that the invoice price has to be accepted as market price in the absence of any evidence to discard the same and the best evidence is documents and payments relating to transaction itself. Reference was also made to the decision of the Tribunal in the case of Commissioner of Customs, Kandla v. Dimple Overseas in which it was held that since full remittance was received from banking channels, declaration of lower value made at consignee port cannot be a reason to arrive at the charge of knowledge of under valuation. In the case of Sanjay Kapoor v. Commissioner of Customs (Imports) Mumbai the charge of misdeclaration of quantity and denial of drawback was set aside, as there was no material or market enquiry regarding market value especially when the foreign buyer has made full payment which he would not have made, if the goods were not of proper quality. In view of this, it was submitted that in their cases no market enquiry whatsoever has been conducted and the entire remittance has been received and in view of the same, the transaction value cannot be rejected. Further, since the goods have already been exported, they cannot be held liable to confiscation as per decision of the Tribunal in the case of K. Kamala Bai v. CC&CE, Trichy . It was further submitted that the exports at similar prices by other exporters have not been questioned and in some of their exports earlier enquiries were made by the C.I.U. and nothing wrong was found. As regards the role of Awin Exim Co, and M/s Ceejay Exports, it was submitted that they were only involved in discounting of the cheques and therefore they have no active involvement, if any, in the alleged misdeclaration of the goods and therefore no penalty can be imposed on them.
5. The Ld D.R. Shri Ajay Saxena, however, submits that there is enough evidence against the applicants for holding misdeclaration of value and for highly over-valuing the exports in order to claim drawback and DEPB benefits. It was submitted that it is noteworthy to mention that while all the consignments were originally shipped to Netherlands, Australia and another European countries but they were all of off loaded at Dubai and were cleared by their firms which belong to Satish Choudhary who was actively involved with the firm Tex-Age and was brother of Shri Subhash Choudhary, the main person. The addresses, at which these goods were originally exported to Netherlands and other countries, were found to be fictitious. This was deliberately done because Dubai being sensitive Port, the examination of the goods has to be rigorous and therefore the port was misdeclared. The remittances have come from Dubai. The Dubai firms were controlled by Satish Choudhary and therefore they cannot be considered to be genuine firms. Visiting cards were found in the residential premises of Satish Choudhary and the office of M/s Avin Exim Group of Companies of M/s Mohd Essa Al Marri Trading Est, Dubai during the raid on which the name of Satish Choudhary was printed who was brother of Subhash Choudhary. Scrutiny of documents recovered during the search of the premises belonging to Subhash Choudhary revealed that there were two sets of invoices in respect of polyester waste in which the purchase invoice showed the value as Rs. 6/-per piece, whereas the unit rate of polyester waste was declared as US$ 2 per piece. Enquiries with Consulate of India, Dubai regarding relationship of Mohd Essa Al Marri Trading Est, with the subject firms revealed that Satish Choudhary was the owner of the said overseas firm and one Pankaj Jhunjhunwala was the Manager of this firm.
The consignments were diverted to Dubai as per direction of Subhash Choudhary. Attention was also invited to the statement of Deepak Khetawat, who in his statement, has stated that though the manufacturing cost of the shirts which he supplied to Subhash Choudhary was around Rs. 50 to 60/- per piece and the unit FOB value declared are around US$ 9 per piece. He also admitted of preparing bogus purchase bill as per direction of Subhash Choudhary and further that Mr. Subhash Choudhary had also issued crossed bearer cheques of his firm Tex-Age which were drawn in favour of various non existing firms, that these cheques were further discounted against cash, that discounting of the said bearer crossed cheques generate cash of the export firms.
6. Reference was also invited to the statement of Prithvi Singh Kuntal @ Gulla in which he gave details of the purchase price and the declared unit rate for export. A comparison shows that for Boys Trousers while purchase price was Rs. 100/- per piece export price was declared at US$ 7.95 by the supplier Mr. Rajendra, and in respect of Men's Trousers the purchase price was Rs. 100-150/- per piece, which declared unit rate for export was US$ 10.95. Similar was the case in respect of other two suppliers Mr. Pappoo and Mr. Dhanraj. Reference was also invited to the invoice submitted by Tex-Age to Indo Arab Chamber of Commerce which showed that the value of the goods was over invoiced by nearly 25 times. In view of this it was submitted that there was enough evidence against the applicants and there is no case for waiver of pre deposit of duty and penalty.
7. As regards retraction of the statements, it was submitted that these retractions are not on record of the D.R.I., and that the suppliers were issued various summons to which they never responded.
8. With regard to the plea that once the goods having been exported, they are not liable to confiscation, attention was invited to the Supreme Court's decision in the case of Weston Components Ltd v. CC, New Delhi wherein it was held that even if the goods are not available for confiscation, they can be confiscated.
9. Shri Mayur Shroff, the Ld Advocate, on behalf of Deepak Khetawat and Pritvi Singh Kuntal @ Gulla submitted that the allegations against these two is that they have arranged supply of garments to M/s Tex-Age with the full knowledge that the goods are going to be undervalued.
This by itself cannot be a ground for imposition of penalty, as they were not in any way, involved in the export of the goods. It was further submitted that penalties have been imposed under Section 113(i) & (iii) of the Customs Act, 1962. Section 113(i) relates to goods in respect of which any prohibition is in force, while Section 113(iii) relates to any other goods. Therefore, the Commissioner should have given positive findings whether the goods are prohibited goods or not and a joint penalty cannot be imposed.
10. Shri Sesha Gopalan, the Ld. Advocate, for the appellant Om Prakash Jhunjhunwala submitted that the allegation against Om Prakash Jhunjhunwala was that he was in the knowledge of the fact that Satish Choudhary was arranging remittance of exports through issue of basic travel quota quality against bogus/stolen passports and he knew that there were no export orders for exports carried out by Tex-Age and that all these exports were made as per direction of Satish Choudhary. He was aware of the fraudulent activities of Subhash Choudhary and have accordingly abetted. It was submitted that Jhunjhunwala was just an employee who was giving blank cheques for signature and he has no role in over invoicing of the goods, if arty and therefore no penalty can be imposed on him.
11. We have considered the submissions. We find that prima facie there is evidence against M/s Tex-Age in respect of over valuation duly supported by the reply received from the supplier of the readymade garments, the reply received from the Consulate General of India, Netherlands that the firms to which the goods were originally shipped were non existent, the fact that the firms to which the goods were ultimately supplied in Dubai belong to Satish Choudhary, the price declared to Indo Arab Chamber of Commerce was vastly different from the one declared in the invoices and the fact that in majority of consignments, the purchase bills regarding procurement of the garments were not maintained and that as per the statements of the suppliers the bills were prepared subsequently as per direction of Subhash Choudhary and others. The merit of the evidence can be examined only at the final hearing of the appeals. Though the written statements appear to have been retracted, the retractions only say that the statements were obtained by applying force etc but it has nowhere mentioned that in what manner the statements were wrong and what was the correct position. The statements are based on the basis of purchase bills etc recovered, statements of warehouse keeper etc and therefore cannot be totally discarded. The Tribunal decisions cited by the applicants are not relevant as in this case the remittance itself is in doubt as in all cases the consignments have not reached the original exporter whose addresses were found to be fictitious but were diverted to Dubai and cleared by one firm who prima facie appears to be in control of Subhash Choudhary/Satish Choudhary. In view of the same, we direct the applicants to deposit Rs. 25.00 lakhs (Rupees Twenty five lakhs Only) towards drawback already sanctioned and paid to them and on such payments, there shall be waiver of pre deposit of the balance amount of drawback and the penalties imposed on various applicants and recovery thereof stayed pending the appeals. Compliance to be reported within eight weeks from the date of receipt of this order. Failure to comply with the stay order shall result in vacation of stay order and dismissal of appeals without further notice.(T. Anjaneyulu) (K.K. Agarwal)Sd/-9-11-06 Sd/-23-10-06 Application Nos.C/S/2342, 2613, 2765 to 2769, 2784 & 2785/06 in Appeal Nos.C/893, 983, 1044 to 1048, 1062 & 1063/06 1. I have gone through the order passed by the ld. Member (T), Shri.
K.K. Agarwal. After going through the facts and circumstances of the case and considering the submissions made by both sides & keeping in view the case law cited in support of their contentions, I am of the view that the applicants have succeeded in establishing a prima facie case and for granting waiver of pre-deposit amount. I record my observations as follows: I find that in the instant case only the firms of Choudhary brothers and its partners and employees have been made the notices in the Show Cause Notice. None of the persons, who have given statements against the appellant firm or Choudhary brothers and who are not associated as partners or employees, have been charged for abetment, inspite of their statements showing either conscious knowledge of the alleged fraudulent export, or their involvement in generation of huge amount of cash which has been allegedly utilized for arranging remittances. Whereas Shri.
Prithvi Singh 'Gulla' has been made a notice, for the reasons best known to DRI, but persons like Shri Sheetal Jain and Shri Kamruddin have not been made notices, inspite of the fact that their statements are similar to the statement given by Shri. Prithvi Singh 'Gulla' and if their statements were to be relied, they consciously abetted the alleged offence. Moreover, it is found the DRI has not only suppressed the vital examination reports in the Show Cause Notice, but also failed to provide the EDI data in respect of the Shipping, Bills in question, inspite of specific demand by the appellant.
2. The evidence brought on record by the DRI to justify that the consignments exported by the Appellant were grossly over-valued, to be stated as follows: (i) statements of various persons including alleged supplies of exported goods, and the persons who discounted cheques issued by the appellant, (ii) the documents recovered from Indo-Arab Chambers showing Invoices of a lower value for the same consignments exported at a higher value, (iii) report of the Consulate General of India, Netherlands showing non-existent nature of the consignees, (iv) and allegations that the goods were cleared by the front firms of Shri. Satish Choudhary at UAE, 3. The evidence gathered by the Department, prima facie appears to be not sufficient enough. Basically the statements recorded by the officers concerned have been retracted. Therefore, at this prima facie stage, no credence can be attached to them. The invoices recovered from Indo-Arab Chambers of Commerce are not statutory record and can not prevail over the uncontroversial reports of physical examination of exported goods by proper Customs Officers available in EDI System Data.
The remittances have been realized in foreign exchange against the exports permitted after random physical verification of export consignments by proper officers.
4. It is contended by the appellant that the same DRI officers issued alert against one M/s. Vaishnodevi Industries as well as against the appellant. The export goods, the buyers, the consignees, rates and item were similar, and even export bills of both the exporters were discounted by the firms of Shri Satish Choudhary. Shipping bills of both the exporters showed the same address of consignee from Netherlands, and the goods in both the cases were off-loaded at UAE.However, the DRI officers on one hand gave no objection for grant of export incentives to M/s. Vaishnodevi Industries and on the other hand issued Show Cause Notice to the appellant.
5. No reasonable explanation was found for the said contention of the Appellant either in the impugned order or in the submissions of the Revenue, except that the two cases are independent. The valuation and declarations accepted after investigations by DRI in the case of M/s.
Vaishnodevi Industries, in similar circumstances would also have to be accepted for the appellant, in view of Section 14 of the Customs Act, 1962 and as well Article 14 of the Constitution which provides for fair and equal treatment in identical circumstances and equality before law.
Therefore, it appears that the Show Cause Notice issued is discriminatory in nature.
6. However, I see no reason to discard the primary evidence in the form of the contemporaneous tamperproof EDI records of Customs House, evidencing physical examination of the appellant's exported goods by the proper Customs Officers, specifically when neither the authenticity of the same is in any doubt nor any allegation has been leveled by DRI against any of the several officers of Customs who had on various occasions physically examined the exported consignments to their satisfaction before the grant of Let Export Orders. I find that the appellant has by way of an illustration pointed out that appellant's shipping bill No. 2022149, though bore a remark - "This consignment was not opened for physical examination by Customs", however the EDI records indicated that not only the said consignment was opened for examination, but was examined of Dy. Commissioner Shri. C.M.Chakraborthy representative sealed samples were also drawn from the said consignment for verification of PMV which was also found to be fair and acceptable.
7. Moreover, I find that some consignments of the appellant containing RMGs were detained at random and were examined by R&I wing of the Customs Preventive Department to the extent of 100%, under a Panchanama. The appellant contended that after ascertaining the PMV which was found as per declaration, the consignments were allowed to be taken back to town after few days. The said contention has not been denied by the Revenue. It can not be therefore, assumed on the basis of suspicion, however grave it may be, that the goods exported by the appellant were grossly overvalued.
8. It is also found that export incentives to the tune of about Rs. One Crore, has not yet been availed by the appellant, inspite of remittances. The merits of other circumstantial evidence can be examined at the stage of final hearing of the Appeal.
9. In the aforesaid circumstances, I am of the view that it is a fit case, wherein appellants are entitled for waiver of pre-deposit.
Accordingly, pre-deposit of the amounts in pursuance of the impugned order is hereby waived and stay is granted from its recovery pending disposal of the appeals.
This appeal may be placed before the Hon'ble President, CESTAT, New Delhi for reference to a third Member for resolving the difference of opinion that has arisen in between two Members of the Bench at Mumbai, CESTAT. The difference of opinion is as follows: Whether the stay application is to be allowed after waiving pre-deposit amount on finding about strong prima facie case and balance of convenience in favour of the appellant and to grant stay pending disposal of the appeal as held by Member (Judicial) or the mater Calls for pre-deposit of Rs. 25 lakhs as there exists no prima facie case as held by the Member (Technical).