1. This is an appeal directed against the order-in-appeal No.S/49-52/93 TS, dated 16-8-1993.
2. The facts of the case are that acting on information received by the officers of Marine and Preventive Wing of the Customs (Preventive) Collec-torate, Bombay to the effect that three consignments imported in the names of buffer companies and were heavily under-invoiced, they took up the investigation. During the course of investigation, statement of Shri Kishore Bhagat, operating on the Custom House Agents licence of M/s. Sunil Shipping Agency, was recorded and it was revealed that in respect of a consignment of 64 cartons of webbing strips imported in the name of Western Sales Corporation, the documents were received by him from one Shri Parasmal Shah and the documents pertained to the consignment were taken over by him. Shri Parasmal Shah in his statement indicated that he handed over the import documents to Shri Kishore Bhagat to file Bill of Entry and these documents were received by him from Shri Dhirubhai N. Sheth, the present appellant. He also revealed that the proprietor of M/s. Western Sales Corpn. in whose name the B/E was filed was Shri Mahendra S. Dalai. Statement of Shri M.S.Dalai was recorded on 9-12-1991, wherein, he has stated that he floated the firm M/s. Western Sales Corporation as a proprietary concern at the instance of Shri Dhirubhai N. Sheth and the said Dhirubhai Sheth has taken his signatures on various blank forms. He retired from the aforesaid firm with effect from 1-4-1991 and produced a copy of the retirement deed in support of his contention. Since he has retired from the said firm with effect from 1-4-1991, he is not the importer of 64 cartons of webbing strips though the documents bear his signatures.
Though this statement was retracted on 7-1-1992, Shri Mahendra S. Dalai vide his letter dated 16-4-1992 and 28-4-1992 confirmed that all the transactions of M/s. Western Sales Corpn. were handled by Shri Dhirubhai Sheth. Vide his letter dated 22-5-1992 he waived the issue of show cause notice but requested for grant of personal hearing.
3. In the statement of Shri Dhirubhai Sheth recorded on 22-5-1992, he stated that the consignment of 64 cartons imported by M/s. Western Sales Corporation was ordered by him and entirely financed by him and Shri Mahendra Dalai was made the proprietor of M/s. Western Sales Corporation by him and he had taken signatures of Mahendra S. Dalai on various documents so that he could freely import on the account of Shri Mahendra Dalai. He, therefore, stated that the consignment of 64 cartons imported in the name of M/s. Western Sales Corporation may be released to him on payment of duty. During the personal hearing, it was pleaded that Dhirubhai N. Sheth is the owner of the goods which have been imported in the name of M/s. Western Sales Corpn. of which Shri Mahendra S. Dalai was the proprietor and Shri Dhirubhai Sheth had financed for the whole deal and Shri Mahendra Dalai happens to be a friend of Shri Dhirubhai Sheth and he had offered to import goods on his behalf on a commission of 5% and even the duty on the consignment has been paid to Shri Kishore Bhagat for remittance to the Department.
Though the adjudication covers 3 consignments, the present appeal is only in respect of the consignment of 64 cartons of webbing strips imported in the name of M/s. Western Sales Corporation, Ahmedabad.
Hence, we confined overselves to the findings of the Collector with regard to the consignment of 64 cartons of webbing strips imported in the name of M/s. Western Sales Corporation, of which Shri Mahendra Dalai was shown as the proprietor and he has signed the B/E and other documents. The Addl. Collector of Customs did not accept the claim of the appellant Shri Dhirubhai Sheth as the importer of the goods and he did not allow the appellant to redeem the goods but ordered confiscation of the goods under Section 111(d) of the Customs Act on the ground that the goods were imported fraudulently under fake name and in the name of benami firm with the concerned person denying having any concern over the import and hence Section 111(d) is applicable and the goods were held liable to confiscation. As regards the claim of Shri Dhirubhai Sheth, he held that he ought to have established the title to the goods but the B/E and other documents such as invoice, certificate only show the name of M/s. Western Sales Corporation, of which the proprietor is Shri Mahendra Dalai and hence in the absence of valid documents held by Shri Dhirubhai Sheth he cannot be construed to be an importer and Shri Mahendra Dalai has not lodged any claim over the goods and has disowned the claim of having imported the goods.
Hence, the redemption of the goods to the appellant Shri Dhirubhai Sheth was denied by the Addl. Collector. He has also held that Shri Dhirubhai N. Sheth having caused the import fraudulently on the basis of the forged documents by using the blank signed declaration, has rendered the goods liable to confiscation under Section 111(d) of the Customs Act and hence he is liable to penalty under Section 112(a) of the Customs Act. Accordingly, he imposed a penalty of Rs. 1,00,000/- on the appellant. The present appeal is against the aforesaid order.
4. Though in the appeal memorandum, a prayer is made for releasing the goods to the appellant, during the hearing Dr. Kantawalla mainly argued against imposing penalty on the appellant. He has pleaded that the Department does not dispute that the import has been made in the name of the proprietary concern floated by Shri Mahendra Dalai at the instance of the appellant and the entire import has been financed by the appellant. Even the duty amount was paid to the Custom House agents for remittance. Moreover, in this case, as is evident from the B/E, REP licences transferred in the name of M/s. Western Sales Corporation, have been produced along with the B/E and they have been found to be acceptable and the licence debit has also been made. The goods have also been assessed. If it is admitted that the import is made in the name of M/s. Western Sales Corporation, the goods are covered by the valid licence transferred in their name and hence confiscation under Section 111(d) cannot be attracted. The Addl. Collector has not pursued the allegation of under invoicing. In this case, the confiscation has been ordered only under Section 111(d) of the Customs Act. In the circumstances, when the goods imported in the name of M/s. Western Sales Corporation are duly covered by valid import licences, which have also been accepted and the licence debit has been made by the Department, there cannot be any ground for ordering confiscation under Section 111(d) of the Customs Act. He also contends that the adjudicating authority has not construed the appellant as the importer, but has construed only M/s. Western Sales Corporation as the importer in which case the licences produced stand in their name have been rightly accepted. Hence, the goods have not been imported contrary to the prohibitions or restriction but have been imported in accordance with the valid licences held in the name of M/s. Western Sales Corporation, who only are treated as the importer by the Addl.
Collector. The Collector (Appeals) has not considered this aspect and merely rejected the appeal in a routine fashion. He would, therefore, urge that even if this Bench is not inclined to accept the appellant as the importer, penalty imposed on him cannot be justified.
5. Shri Mondal, the ld. SDR, on behalf of the Department, however, contended that the undisputed factual position is that the goods have been imported in the name of M/s. Western Sales Corporation by filling up some blank forms obtained from Shri Mahendra Dalai and the proprietary concern was floated by the appellant, which was subsequently dissolved, by Shri Mahendra Dalai retiring from the said firm. All the same, the blank letter heads and declarations have been utilised for the import of this consignment by the appellant fraudulently and hence such an import cannot be said to be legal and hence confiscation under Section 111(d) is justified. Since the appellant is mainly concerned with arranging the illegal import by floating a benami proprietary concern and resorted the import through fraudulent documents, he is liable to penalty.
6. After hearing both the sides and on perusing the records made available by the ld. SDR, we find that Shri Mahendra Dalai in his statement dated 9-12-1991 has indicated the position as below : "Since Shri Dhirubhai Sheth had requested me that he wanted to open a firm in Ahmedabad in order to avoid certain taxes such as octroi, sales tax on imported consignments which could be directly imported in the name of the Ahmedabad based firm. Thus, I set up M/s. Western Sales Corporation having address of my friend Shri Rasiklal Shantilal Dalai at B-9, Bhumika Appts. Nawa Vikas Grih Rd. Paldi, Ahmedabad - 380 007 and I was to get certain percentage of the profit which was decided upon. At this stage, Shri Dhirubhai Nandlal Sheth took my signature on various forms, particulars of which I am not aware".
From the aforesaid portion of the statement, it is clearly evident that Shri Mahendra Dalai agreed to commence the firm and also agreed to sign various blank forms at the instance of the appellant by receiving the monetary consideration by getting certain percentage of profit and this arrangement appears to have been motivated by saving of certain taxes such as octroi, sales tax levied on the consignment, which could be averted, if they are directly imported in the name of Ahmedabad firm.
This statement, though retracted, was subsequently confirmed by Shri Mahendra Dalai and even during the adjudication proceedings, both, the appellant as well as Shri Mahendra Dalai, have agreed that the import was made in the name of M/s. Western Sales Corporation, Ahmedabad, though the entire import was motivated and financed by the appellant.
In the circumstances, going by the benami arrangements, when the licences have been produced standing in the name of M/s. Western Sales Corporation and their validity otherwise is not questioned by the Department but accepted and debited, the goods cannot be said to have been imported in contravention of any prohibitions attracting the mischief of Section 111(d) of the Customs Act. All the same, in a benami transaction of this type, where, all the documents including the title to the goods standing in the name of M/s. Western Sales Corporation and even the import licences are standing in their name, the appellane, because of the fact that M/s. Western Sales Corporation are a benami firm, cannot plead for substitution of his name as the importer, for purpose of, either allowing clearance against those licences or allowing release on payment of redemption fine. It would have been a different question, if M/s, Western Sales Corporation were before us and had sought for clearance and in that case their plea could have been considered. In this case, M/s. Western Sales Corporation have indicated, even before the adjudicating authority, that they are not interested in the goods and they do not want to clear the goods, despite the fact that licences have been produced. Hence, the goods are to be treated as abandoned by the importer and another person, unless he could establish clear title to the goods, cannot claim release of the goods. Thus, in our view, even if confiscation under Section 111(d) cannot be justified, release of the goods to the appellant, in the absence of producing clear title to the goods, cannot be ordered, as pleaded in the appeal memorandum. The Department is at liberty, to dispose of the goods in accordance with the provisions of Section 48 of the Customs Act.
7. Though we may agree that in this case fraudulent design is discernible in projecting another person as the importer by the appellant/ apparently this has been done with a view to avoid the payment of octroi and sales tax, which is evident from the first statement of Shri Mahendra Dalai extracted above. It is not the case of the Department that these goods could be imported only by actual users and M/s. Western Sales Corporation are actual users and they have been put on the front and an attempt was made by the appellant to clear the goods in that name for diversion into the market. On the contrary, REP licence is standing in the name of the importer as per the title holder to the goods have been produced and accepted for debit. Hence, we hold that the penalty imposed on the appellant cannot be sustained, since no act of omission or commission rendering the goods liable to confiscation under Section 111(d) of the Customs Act can be said to have been established against the appellant. The adjudicating authority has not gone into the allegation of undervaluation and there are no findings to the effect that there is a mis-declaration of value rendering the goods liable to confiscation under Section 111(m) and hence penal liability on the appellant from this angle also could not be considered. We also note that there are no findings of the adjudicating authority establishing nexus of the appellant with the other two consignments, and in those two cases, two other persons were held liable for penalty and not the appellant. In the circumstances, penalty imposed under Section 112 on the appellant merely because of the benami arrangement for this import cannot be sustained under the Customs Act. Hence, we allow the appeal and set aside the penalty, only in so far as the appellant is concerned.