Penalty u/s 112(a) of Customs Act reduced as appellant behaved in good faith

Amit Nagi Vs Principal Commissioner of Customs (CESTAT Delhi)

CESTAT Delhi held that as evidenced, appellants believed Sh. Rajan Arora in good faith and were also not aware about the mis-declaration/ under-valuation of the goods imported. Hence, penalty u/s 112(a) of the Customs Act reduced from INR 12 Lakhs to INR 50,000.

Facts-

The appellant, Sh. Amit Nagi, proprietor of M/s Dev International and the other appellant Sh. Ravinder Puri is a middleman/ facilitator who facilitates the traders engaged in import /export. It is alleged that the appellant, on the advice of Ravinder Puri, allowed the use of his IEC code for import to be made by Sh. Rajan Arora.

It was alleged that the gross weight of the container imported was found to be 8890 Kgs. in excess of the declared weight and the goods were declared as disposable cups, whereas, on examination ladies readymade garments and disposable glass/ cups were found.

It was stated that the appellant and Sh. Ravinder Puri believed Rajan Arora in good faith that he wants to use the IEC code of M/s Dev International for import of goods and were not aware about the actual goods being imported by Rajan Arora in connivance with Sh. Ramesh Wadhera.

The Adjudicating Authority ordered confiscation of readymade garments and disposable glass and imposed penalty u/s 112(a) on M/s. Dev International, Sh. Amit Nagi, Shr. Ramesh Wadhera, Sh. Rajan Arora and Sh. Ravinder Puri.

Being aggrieved, the appellants preferred the appeal before the Commissioner (Appeals) who rejected the same. Being aggrieved, the present appeal is filed.

Conclusion-

Thus, I find that there is no active role played by these appellants save and except facilitating the use of IEC code of M/s Dev International by another for some monetary consideration. In this view of the matter, I allow both the appeals in part modifying the order of penalty. The penalty of Rs. 12 lakhs on Sh. Amit Nagi under Section 112(a) is reduced to Rs.50,000/-.

Consolidated penalty on Sh. Ravinder Puri – Rs. 15 lakhs under Section 112(a) read with Section 114AA is reduced to Rs. 1 lakhs. The penalty of Rs. 12 lakhs on M/s Dev International is set aside as penalty imposed simultaneously is not exigible on the Proprietor and Proprietorship firm.

FULL TEXT OF THE CESTAT DELHI ORDER

The appellant, Sh. Amit Nagi, Proprietor of M/s Dev International having IEC No. 3015004000 and is located at Ludhiana. The other appellant Sh. Ravinder Puri is a middleman/ facilitator who facilitates the traders engaged in import /export.

2. The Officers of DRI Delhi Zonal Unit examined 13 containers allegedly shown to have been imported in the name of the appellant’s firm namely M/s Dev International. The goods declared to have been contained in those containers were disposable glass.

3. That as per Job Order, a Bill of Entry No. 3504520 dated 07.12.2015 for two container No. JFSU 0228920 & CRSU 9126043 was allegedly filed in the name of M/s Dev International through CHA – M/s Jai Impex.

4. That on weighment of Container No. JFSU 0228920, the gross weight was found to be 8890 KGs in excess of the declared weight and the goods were declared as disposable cups whereas on examination ladies readymade garments (96200 pcs. in 481 HDPE Bags) and disposable Glass/Cups (1,11,000 pcs. in 111 Cartons) were found. The second Container No. CRSU 9126043 was weighed and the gross weight of the goods was found 8810 Kgs. in excess of the declared weight and the goods were declared as disposable cups whereas on examination ladies readymade garments (100,800 pcs. in 504 HDPE Bags and disposable glass/cups – 1,13,000 pcs. in 113 Cartons were found. Hence goods found in both containers were put under seizure as per panchnama dated 14.12.2015.

5. That so far as other remaining 11 containers were concerned neither any Job Order nor any Bill of Entry was filed by anybody, however, in all those containers, goods were found to be other than what was mentioned in the bill of lading i.e. the goods were found to be readymade garments and also disposable glass/cups whereas the goods mentioned in the Bills of lading were only disposable glass/cups.

6. That as per the statement of CHA M/s Jai Impex, one Sh. Ravinder Puri was the contact person for clearance of the goods covered under the above said Bill of Entry. Hence statement of Sh. Ravinder Puri was recorded wherein he inter alia stated that he used to bring orders from various traders in Ludhiana who wanted to import various products and used to give these orders to one Sh. Amit Nagi who used to import goods from abroad by using his own IEC in the name of M/s Dev International Ludhiana. He further stated that for this work he used to get a commission of 2% of the sale value of the imported goods. He further stated that he came in contact with one Sh. Rajan Arora through one of his friends and Sh. Rajan Arora offered him Rs. 2,50,000/- per consignment if he provided IEC to Sh. Rajan Arora for his import. He further stated that he obtained the permission of Sh. Amit Nagi for this purpose and gave him a copy of Amit Nagi’s PAN and IEC of M/s Dev International. He further stated that in lieu of the arrangement done by him (Ravinder Puri) with Sh. Rajan Arora for import of consignment pertaining to bill of entry No. 3504520 dated 07.12.2015, he was to get Rs. 50,000/- and this included CHA charges also. He further stated that he was in verbal agreement of import of disposable glasses only with Sh. Rajan Arora for this consignment and was not aware about any other goods being imported in these two container and that Sh. Rajan Arora could only explain about the goods imported other than the disposable glasses.

7. That statement of Sh. Rajan Arora partner of CHA firm M/s Sark Enterprises was recorded who inter alia stated that one Sh. Ravinder Puri approached him with an IEC in the name of M/s Dev International which could be used for imports in the name of the said firm by mis-declaring the goods and he assured clearance from customs at his own risks for which he was to be paid Rs. 2,50,000/-per container (to Sh. Ravinder Puri) which included duty, CHA Charges etc. He further stated that he was in search of such an IEC as one Sh. Ramesh Wadhera had approached him for import of some consignment of garments and consumables on someone elses IEC, by mis-declaring the same as consumables. He further stated that he was supposed to get Rs. 2,75,000/- from Sh. Wadhera which included customs duty and CHA charges and accordingly he asked Sh. Ravinder Puri for clearance of the said consignment by using IEC available with Sh. Ravinder Puri. He further stated that he prepared the import documents in the name of M/s Dev International Ludhiana on the basis of PAN and IEC provided by Sh. Ravinder Puri. He further stated that he was not aware as to what goods were being imported by Sh. Ramesh Wadhera in these consignments.

8. That the statement of Sh. Ramesh Kumar @ Sh. Ramesh Wadhera was recorded on 19.03.2016 wherein on being shown the statement of Sh. Rajan Arora, he denied having given any work of customs clearance of import made by M/s Dev International.

9. That from the statements of Sh. Ravinder Puri, Sh. Srinath Ramanujam, Director of M/s Red Eagle shipping Agencies (P) Ltd., Shri Vipul Rajan, Director of M/s Winworld Container Lines Pvt. Ltd., Sh. Rajan Arora, Partner of M/s Sark Enterprises and Sh. Ramesh Wadhera and the fact that no other person has claimed the goods imported in the above said thirteen containers, it appeared that:-

i. the seized ladies ready-made garments were being imported by misusing the IEC of M/s Dev International;

ii. the seized ladies readymade garments were being imported by resorting to mis- declaration under the guise of disposable cups as declared in the bills of lading for all the containers and one bill of entry was filed in respect of two containers (out of these thirteen containers);

iii. the seized ladies ready-made garments were being imported by re­sorting to mis- declaration under the guise of disposable glass as per the instructions of Sh. Ramesh Wadhera with an intention to evade Customs duty;

iv. Sh. Rajan Arora, Sh. Ravinder Puri and Sh. Amit Nagi are conduit for arranging the IEC, booking of containers and clearance of the mis-declared goods with the knowledge that ready-made garments are being imported by mis-declaring the same as disposable glasses for monetary considerations. Therefore they connived with Sh. Ramesh Wadhera in facilitating the illegal import;

v. Bill of Entry (no. 3504520 dated 07.12.2015) were filed in respect of two containers only, declaring the goods as ‘Disposable Glasses’. For rest of eleven containers, bills of entry were not filed even and as per the bills of lading for rest of the containers the goods were declared as ‘Disposable Glass’.

vi. Ready-made garments of Indian origin have been imported in the guise of declared item i.e. ‘Disposable Glass’ by way of concealment.

vii. These goods contained in all thirteen containers appeared to have been imported in contravention of provisions of Section 46 of the Customs Act, 1962 by mis-declaring the actual description in Bill of Entry/Bill of lading, therefore the ready- made garments valued at Rs. 8,09,55,600/- imported by concealment/mis-declaration appear to be liable to confiscation under Section 111(f), 111(i) and 111(m) of the Customs Act, 1962. The disposable glasses, valued at Rs. 10,39,140/-used to conceal the ready-made garments in contravention of the provisions of the Act ibid appeared liable to confiscation under Section 119 of the Customs Act, 1962.

viii. From the statements of various persons concerned with regard to import in the thirteen containers, Sh. Ramesh Wadhera appeared to have imported the ready-made garments, in the guise of disposable glasses with an intention to evade Customs duty. This act of omission and commission has rendered the goods imported in the above said thirteen containers liable to confiscation under the provisions of the Customs Act. Therefore, he has rendered himself liable to penalty under Section 112 of the Customs Act, 1962.

ix. As accepted in his statements dated 15.12.2015 and 09.11.2016, recorded under Section 108 of the Customs Act, 1962, Sh. Rajan Arora has actively connived with Sh. Ramesh Wadhera in import of ready-made garments in the guise of disposable glasses in the thirteen containers. He arranged lEC for this purpose, engaged person for clearance of the goods and also booked the containers to facilitate this illegal import with the knowledge that the goods so imported are liable to confiscation under the provisions of the Section 111 of the Customs Act, 1962. For this purpose he further connived with Sh. Ravinder Puri also to hatch the conspiracy. Therefore he has dealt with the goods contained in thirteen containers with the knowledge that the same were liable to ‘confiscation and has therefore rendered himself liable to penalty under Section 112 of the Customs Act, 1962. Further, he caused Sh. Ravinder Puri to make false declaration before the Customs in respect of Bill of Entry No 3504520 dated 07.12.2015 and therefore has rendered himself liable to penalty under Section 114 AA of the Customs Act, 1962.

x. As per his statement dated 15.12.2015, Sh. Ravinder Puri connived with Sh. Rajan Arora and Sh. Amit Nagi – Prop. of M/s Dev International, Ludhiana in import of ready-made garments in the guise of disposable glasses in the thirteen containers, by providing proxy IEC for clearance of these goods. Therefore, he has dealt with the goods contained in thirteen containers with the knowledge that the same were liable to confiscation and has therefore rendered himself liable to penalty under Section 112 of the Customs Act, 1962. Further, he made false declaration before the Customs in respect of Bill of Entry No 3504520 dated 07.12.2015 and therefore has rendered himself liable to penalty under Section 114 AA of the Customs Act, 1962.

xi. As per statement dated 15.12.2015 of Sh. Ravinder Puri, Sh. Amit Nagi, Prop. of M/s Dev International, in connivance with Sh. Ravinder Puri, allowed his IEC to be used for this illegal import for monetary consideration with the knowledge that the goods so imported were liable to confiscation and has also contravened Section 11 of the Foreign Trade (Development & Regulation) Act, 1992 read with Rule 11 of Foreign Trade (Regulation) Rules, 1993 and thus has rendered himself liable to penalty under Section 112 of the Customs Act, 1962.

10. Based on the above investigations, M/s Dev International, Ludhiana through its proprietor, Sh. Amit Nagi, Sh. Ramesh Wadhera, Sh. Rajan Arora and Sh. Ravinder Puri were Show Caused as to why:-

i. The goods i.e. 12,26,600 pieces of ready-made garments imported, in guise of Disposable Glass under thirteen containers as mentioned in the table under para 18 in the show cause notice, valued at Rs. 8,09,55,600/- should not be confiscated under the provisions of Section 111(f), (i) and (m) of the Customs Act, 1962.

ii. The goods i.e. 1,50,600 pieces of Disposable Glass valued at Rs. 10,39,140/- used for concealment of ready-made garments, imported under the said thirteen containers, should not be confiscated under the provisions of Section 119 of the Customs Act, 1962.

iii. Penalty should not be imposed on M/s Dev International, Ludhiana, Sh. Amit Nagi and Sh. Ramesh Wadhera, under Section 112 of the Customs Act, 1962;

iv. Penalty should not be imposed on Sh. Rajan Arora and Sh. Ravinder Puri under Section 112 and Section 114AA of the Customs Act, 1962.

11. That the Proprietor Sh. Amit Nagi appeared for personal hearing and stated that he had in fact given his IEC to Sh. Ravinder Puri out of Friendly relations and he was not at all aware of the fact that his IEC would be mis-used. In fact he was informed that the IEC shall be used for importer of genuine crockery.

12. That the Ld. Adjudicating Authority vide impugned order held that Sh. Rajan Arora, Ravinder Puri & Amit Nagi are conduit for arranging the IEC, booking of containers and clearance of the mis-declared goods with the knowledge that readymade garments are being imported by mis-declaring the same as disposable glasses for monetary consideration.

13. Accordingly, the Adjudicating Authority vide Order-in-original dated 17.04.2018 ordered confiscation of readymade garments (2,24,000 pieces valued at Rs.1,47,83,999/- imported vide Bill of Entry No. 3504500 dated 07.12.2015 under Section 111(f), (i) and (m) with option to redeem on fine of Rs. 30 lakhs. Further confiscated readymade garments in the other eleven containers 1002600 pieces valued at Rs.6,61,71,601/- under Section 111(i) of the Act, also confiscated the disposable glasses valued at Rs. 10,39,140/- with option to redeem on fine of Rs. 2,50,000/-. Further penalty was imposed as follows:-

14. Being aggrieved, the present appellants filed appeals before the Commissioner (Appeals) who vide the impugned order have been pleased to reject the appeal. Being aggrieved, the appellants are in appeal before this Tribunal.

AMIT NAGI:

15. Learned Counsel for the appellant inter alia urges the following grounds:-

i. It is an admitted case as per record, that a Bill of entry pertaining to only two consignments (containers) were filed in the name of the appellant’s firm and that too was filed without his knowledge and no Bill of entry was filed for the rest 11 containers by any person.

ii. It is admitted position in the show cause notice that nobody claimed any of the 11 consignments, then merely because the Bills of Lading showed M/s Dev International as the consignee, and since Dev International did not take any steps to claim the goods, then they cannot be made liable for penalty at least for the 11 containers for which no Bill of Entry was filed.

iii. It is admitted fact on record that the appellant has not presented himself in any manner before the Customs Authorities claiming to be the owner of the seized goods at any stage. Even for the two containers for which a bill of entry was filed in the appellant’s name, the same was also dealt by Sh. Ramesh Wadhera and Sh. Rajan Arora as accepted by Sh. Rajan Arora and therefore, the appellant cannot be made liable for mis-declaration.

iv. It is admitted position in show cause notice that it was Sh. Rajan Arora, in connivance with Sh. Ramesh Wadhera, prepared the documents for the two containers as admitted by him. Thus this appellant – Amit Nagi cannot be penalized as he had not done anything which made the goods offending and liable to confiscation.

v. The appellant categorically stated that he was neither aware nor he was involved at any stage with the consignments nor he had any role to play in the alleged illegality involved in the seized consignment.

vi. The impugned order wrongly held that penalty is imposable on the proprietor of M/s Dev International as he had provided his IEC which have been used to mis-declare the goods. In fact the proprietor has categorically stated that he was not at all aware with regard to mis-declaration as he has given his IEC to Sh. Ravinder Puri for genuine import of crockery.

vii. Without having any evidence on record to show that the appellant was in fact aware of the mis-declaration at any stage, the impugned order has wrongly held that the appellant was aware of the mis-declaration. It is submitted that the show cause itself admits that it was Sh. Rajan Arora and Sh. Ramesh Wadhera who were the persons behind these imports.

viii. The Ld. Appellate Authority has wrongly held that Sh. Amit Nagi allowed his IEC for illegal import referring to Sh. Ravinder Puri’s statement. However, it is a wrong finding, as Sh. Amit Nagi permitted Sh. Ravinder Puri to import on his IEC for legal imports and Sh. Ravider Puri also permitted Sh. Rajan Arora to use the said IEC of Sh. Amit Nagi for legal imports of crockery only. He has nowhere accepted in his statement about any knowledge of illegal motive of Sh. Rajan Arora.

ix. Lending of IEC is not an offence and the Ld. Appellate Authority has erred in holding that the IEC cannot be permitted to be used by others and mis­use cannot be without the knowledge of IEC holder and therefore, he was fully aware of the illegal import of the consignment and knowingly and willfully have facilitated the import of readymade garments in the guise of disposable glass for consideration of money. This finding is without any evidence and therefore the same is merely a presumption by the Ld. Adjudicating Authority.

x. Penalty cannot be imposed on the proprietorship firm as well as on the appellant as the firm and its proprietor are one and same entity. (Universal Commercial Corporation versus Collector of Customs Delhi reported in 1994 (69) ELT 150 (Tri.) and Commissioner of Customs CSI Airport, Mumbai Versus Gian Chand Jain reported in 2015 (321) ELT 199 (Bom.)

xi. Statement of Sh. Sandeep Sharma, Director of M/s Spazehub Logistics (P) Ltd. recorded on 07.04.2016 clearly revealed that it was Sh. Rajan Arora and Sh. Ramesh Wadhera who did all negotiation and took all steps towards all these consignments and it was Sh. Rajan Arora who provided him the KYC Documents and that he never met any person representing Dev International. Hence, imposing penalty either on Sh. Amit Nagi or Sh. Ravinder Puri were not justified.

xii. The appellant could not be even said to have abetted the doing or omission which has rendered the goods liable for confiscation as the appellant has at no point of time claimed the ownership of the goods, rather the appellant has been consistently denying having either ordered for importation or had any knowledge with regard to the offending goods which were allegedly imported in his name.

xiii. This Tribunal in the case of Manisha Karia @ Manisha Shah versus CC reported in 2014 (301) ELT 415 held that a penalty cannot be imposed on the appellant as the appellant has neither claimed the goods as an importer nor have filed any bill of entry for the seized goods.

xiv. It is also urged that the appellant is a person of small means having annual income of about Rs. 2.5 lakhs to Rs. 3 lakhs and the penalty imposed upon him Rs. 12 lakhs is disproportionate with respect to the alleged offence under the Customs Act.

RAVINDER PURI:

16. Learned Counsel for the appellant inter alia urges the following:-

(i) This appellant was not aware at any stage with regard to the consignment covered under the Bill of Lading nor he had any role to play in the alleged illegality of mis-declaration. Admittedly, the Bill of Entry filed was with respect to one consignments of containers imported in the name of M/s Dev International. No bill of entry was filed for the rest eleven containers. Further admittedly nobody claimed the goods in the other eleven containers. Unless a person files bill of entry he cannot be treated as an importer.

(ii) Admittedly, this appellant have not claimed to be owner of the seized goods at any stage. Even the two containers for which bill of entry was filed, the same admittedly were dealt with by Sh. Ramesh Wadhera jointly with Sh. Rajan Arora who has taken all steps for clearance of the said two containers. Thus, this appellant being neither the importer nor the owner of goods is not liable for the alleged mis-declaration. Thus, this appellant cannot be penalised under the provisions of Section 112(a) read with Section 114AA.

(iii) In the statement recorded of this appellant he has categorically stated that he was not aware at any stage with regard to the goods contained in the consignment relevant to the bill of entry.

(iv) The Court below have held – this appellant was aware of the mis-declaration without bringing on record any evidence to the effect that he was aware of the mis-declaration.

(v) The show cause notice in so many words admits that it was Sh. Rajan Arora in connivance with Sh. Ramesh Wadhera are the person behind the mis-declaration, attempt to smuggle readymade garments. Sh. Rajan Arora has admitted that it was he who provided the documents to Sh. Ravinder Puri with respect to the two containers for which bill of entry was filed. Sh. Rajan Arora has nowhere stated that Sh. Ravinder Puri was aware of the mis-declaration.

(vi) The contention of the appellant is also corroborated by the statement of Sh. Sandeep Sharma, Director of M/s Spazehub Logistics (P) Ltd., who inter alia stated that it was Sh. Rajan Arora and Sh. Ramesh Wadhera who did all negotiations and took all steps with respect to these two consignments. Further, it was Sh. Rajan Arora who provided the KYC documents as Sh. Sandeep Sharma never met any person representing M/s Dev International. This appellant had no knowledge about the illegal motive of Sh. Rajan Arora in connivance with Sh. Ramesh Wadhera. This appellant is also person of small means and penalty imposed is disproportionate. Accordingly, the learned Counsel for the appellant prays for allowing both the appeals with consequential benefits.

17. Learned Authorised Representative Sh. Mahesh Bhardwaj appearing for the Revenue relies on the impugned order.

18. Having considered the rival contentions, I find that Sh. Amit Nagi on advice of Sh. Ravinder Puri allowed the use of his IEC code for import to be made by Sh. Rajan Arora. It is further evident that both these appellants believed Sh. Rajan Arora in good faith that he wants to use the IEC code of M/s Dev International for import of crockery/ glasses/ disposable glasses. Further, it is evident that both these appellant were not aware about the actual goods being imported by Sh. Rajan Arora in connivance with Sh. Ramesh Wadhera. It is further apparent that such misuse of IEC of M/s Dev International could not have been done without the active connivance of the CHA – M/s Jai Impex. I find that there has been no interrogation with the CHA for facilitating import by Sh. Rajan Arora by using the IEC code of Sh. Amit Nagi, without proper authorisation. Thus, I find that there is no active role played by these appellants save and except facilitating the use of IEC code of M/s Dev International by another for some monetary consideration. In this view of the matter, I allow both the appeals in part modifying the order of penalty. The penalty of Rs. 12 lakhs on Sh. Amit Nagi under Section 112(a) is reduced to Rs.50,000/-.

19. Consolidated penalty on Sh. Ravinder Puri – Rs. 15 lakhs under Section 112(a) read with Section 114AA is reduced to Rs. 1 lakhs. The penalty of Rs. 12 lakhs on M/s Dev International is set aside as penalty imposed simultaneously is not exigible on the Proprietor and Proprietorship firm.

20. Both the appeals are allowed in part with consequential benefits.

(Pronounced on 23.11.2022).