Case Law Details

Case Name : M/s Global Cambay Marine Service Pvt Ltd Vs C.C. (CESTAT Ahmedabad)
Appeal Number : Appeal No.C/10229,11596-11598/2015-DB
Date of Judgement/Order : 07/08/2018
Related Assessment Year :
Courts : All CESTAT (771) CESTAT Ahmedabad (104)

M/s Global Cambay Marine Service Pvt Ltd Vs C.C. (CESTAT Ahmedabad)

As regard the personal penalties imposed on the employees, namely, Sh. P P Radhakrishnan and Sh. Hanzel A Malik we find that these person are mere employees and performing their duties as per the instruction of their employer. There is no evidence that they have got any incentive out of the benefit derived by the appellant company. This Tribunal in the case of O P Agarwal (supra) held that employees of company carrying out orders given to them are not person in charge / responsible for conduct of its business, hence not liable for penalty. In the case of M/s Carpenter Classic Exim Pvt. Ltd (supra) this Tribunal has taken a view that employee having acted under the directions of his bosses there being no evidence that he personally benefited from the under invoicing of the goods, the penalty cannot be imposed on him under Section 112(a) of Customs Act, 1962. A similar view was taken by this Tribunal in the case of Associated Plastics (supra) and held that employee have not played on their own violation in evasion of duty, therefore, the penalty is not justifiable.

The Hon’ble Gujarat High Court in the case of M/s Amin Chandrakant Bhailalbhai held that the employee do not have knowledge or reason to belief that goods are liable to confiscation under Section 111 of Customs Act, 1962, the penalty is not imposable on employee.

In view of the above judgments and the facts involved in the present case related to the employees of the company we find that the employees cannot be penalized as they do not have belief that the goods are liable for confiscation, moreover, they are mere employee of the company working on fixed salary basis and there is no evidence on record that they were benefited by any act of evasion of duty by the company, therefore, the employees are not liable for penalty.

FULL TEXT OF THE CESTAT JUDGMENT

Brief facts of the case are that the appellant Company M/s Global Cambay Marine Service Private Limited, Surat (GCMSL) are engaged in activity of supply of Ship Store, Water Bunker and other item to the vessels calling at various port of Gujarat. From the fleet vessels they have, one utility boat named MV, Al-Vard used by them in towing of sea playing vessels. On intelligence received by Officers of DRI, Ahmedabad that Sh. Zohar Mallampattiwala, Director of M/s GCMSPL was indulging in illegal import of diesel oil in barges and tugs of GCMSPL deployed at Hazira Port, Surat and its boat MV Al-Vard was indulging in illegal import of diesel oil and has retained the same as bunker for its use. The investigation by DRI revealed that GCMSPL illicitly imported diesel oil in the Tug Al-vard. The quantity of said diesel oil was ascertained by viist and boarding on the said boat at L&T Jetty by the officers of DRI, Sh. Mallampattiwala Director of GCMSPL and independent surveyor Sh. Atul Kumar Suryatal of M/s Welgarz Surveyor and Adjustors Private Limited, Surat. The master Sh. Pattvitti Parukutty Radhakrishanan and the Engineer Sh. Bhashkar show of the boat were inquired about the status of the bunker available. Actual quantity of diesel oil was ascertained through sounding of the bunker tanks in the vessels by the engineer and surveyor in the presence of Master Sh. Radhakrishanan and was found to be 103.657 MT. On inquiry Sh. Radhakrishanan confirmed that they have taken 150 MT of diesel oil from one foreign going vessel Norgas Orinda on 06.11.2010 on the instructions of Sh. Zohar Mallampattiwala and that they have consumed some of it in voyage. As the Tug was used in improper import of diesel oil, the Tug valued at Rs. 6,75,00,000/- along with stock of 103.657 MT of diesel oil valued at Rs. 5,82,850/- which was not declared, was placed under seizure vide Panchnama dated 19.02.2012 with reasonable belief that the same was liable for confiscation under Section 115(2), 111 (f) and 111(j) of the Customs Act, 1962. Sh. Zohar Mallampattiwala admitted to the illicit import of diesel and voluntarily paid Rs. 20 Lakhs vide TR-6Challan No.01/2011-12 dated 21.02.2012 during the investigation. The GCMSPL vide its letter dated 27.02.2012 requested the Commissioner of Customs, Ahmedabad for provisional release of the said Tug along with diesel oil. The adjudicating authority allowed the same on execution of bond of Rs. 7,26,82,850/- and Bank Guarantee of Rs. 51,82,850/-. Thereafter, the SCN dated 03.08.2012 was issued to GCMSPL Sh. Zohar Mallampattiwala, Sh. Pattvitti Parukutty Radhakrishanan, Sh. Hanzel Malik, Sh. Bosov Stanislav which was culminated into adjudication order, wherein the charges proposed in the SCN were confirmed and following order has been passed:

i. Confiscated 103.657 MT of diesel oil valued at Rs. 51,82,850/- found in the Tug and allowed its redemption on fine of Rs. 13 Lakhs.

ii. Confiscated 46.343 MT of diesel oil valued Rs. 23,17,150/- not found in the Tug and allowed its redemption on fine of 6 Lakhs.

iii. Confirmed duty demand of Rs. 12.71 Lakhs approx on the clandestinely procured 150 MT diesel oil with equal penalty of Rs. 12.71 Lakhs approx and interest on M/s GCMSPL.

iv. Confiscated Tug Al-Vard valued Rs. 6.75 Crore and allowed its redemption on fine of Rs. 1.75 Crore.

v. Imposed personal penalty of Rs. 10 Lakhs each on Sh. Zohar Mallampattiwala, Sh. P P Radhakrishnan and Sh. Hanzel A Malik.

Thereafter, the appellant filed appeal before Commissioner (Appeals), however, the same was dismissed for non- compliance of pre-deposit. Aggrieved by the said order in appeal, appellant filed appeal before this Tribunal which was allowed by way of remand to the Commissioner (Appeals) for deciding the matter on merit thus, the present impugned order came to be passed.

2. Shri. Deepak Kumar Ld. Counsel appeared on behalf of the appellant M/s GCMSPL, Surat, Sh. Zohar Mallampattiwala, Sh. Pattvitti Parukutty Radhakrishanan and Sh. Hanzel Malik. He fairly concedes that the appellant is not contesting the confirmation of duty, however, the appellant are contesting the imposition of redemption fine, penalty and personal penalties imposed in Director and employee of the Company. He submits that the appellant company immediately on seizure of vessel and diesel paid Rs. 20 Lakhs towards duty, interest and penalty. He submits that the amount of duty involved is Rs. 12.71 Lacs only, therefore the redemption fine of Rs. 1.75 Crore on confiscation of Tug is very harsh. He further submits that the value of Tug was wrongly taken as 6.75 Crore whereas at the time of seizure the value was only 1.90 Crore which was insured value hence, the original value on 6.75 Crore taken by the Customs is not correct. He submits that as per section 115(2) of Customs Act, 1962, redemption fine of conveyance cannot exceed the market price of the goods which is sought to be imported inappropriately. Therefore, the redemption fine of Rs. 1.75 Crore on the Tug Al-Vard is travelling beyond the provision of Section 115(2). He submits that Hon’ble Supreme Court in the case of Jain Exports Private Limited reported at 1993 (66) ELT 537 (SC) held that while imposing redemption fine one must keep in mind the totality of circumstance and the benefit derived by the importer from illegal import. He submits that in this case the benefit derived by the appellant is only Customs Duty amount to Rs. 12.71 Lacs hence, the redemption fine of Rs. 1.75 Crore exorbitantly high. The same needs to be substantially reduced. As regard the redemption fine in respect to the confiscation of the goods i.e. seizure of Diesel Oil, the redemption fine was imposed equally to the duty amount i.e. Rs. 13 Lakhs whereas the quantity of diesel seized only 103.657 MT on which the duty amount comes to Rs. 8.78 Lakhs, therefore, the redemption fine of Rs. 13 Lakhs is not justified. He further submits that the redemption fine on Rs. 6 Lakhs was also imposed on the quantity of 46.343 MT of diesel oil which was not available and the same was not seized. Therefore, the goods which were neither available and nor seized, the redemption fine cannot be imposed on such quantity. As regard the penalty of Rs. 10 Lakhs each imposed on Director Sh. Zohar Mallampattiwala and 2 employees Sh. Pattvitti Parukutty Radhakrishanan and Sh. Hanzel Malik. He submits that Sh. Zohar Mallampattiwala expired on 21.04.2018. He placed Death Certificate of Sh. Zohar Mallampattiwala, dated 16.05.2018 issue d by State Municipal Corporation, Government of Gujarat. As regard penalties on two employees, he submits that since the employees are not beneficiary of any gain made by the appellant company, they are only performing their duty as per instructions of Director of the Company, the penalty on employees should not be imposed.

3. He further submits that all the individual appellants were neither aware nor any evidence has been brought on record that they were aware that by their action diesel oil or Tug AL-Vard has become liable for confiscation under Section 111 of the Customs Act, 1962, penalty under Section 112 can only be imposed when the person knows that goods are liable to confiscation or abate such act by which such goods are liable for confiscation. In support of his above submission, he placed reliance on the following judgment:

  • O. P. Agarwal Vs. C.C., Kandla 2005 (185) ELT 387 (Tri. Del.)
  • Carpenter Classic Exim Pvt. Ltd Vs. C.C. Bangalore 2006 (200) ELT 593 (Tri.Bang.)
  • Associated Plastics And Rayons Vs. CCE & Customs, Vapi 2007 (210) ELT 524 (Tri. Ahmd.)
  • CCE Vs. Amin Chandrakant Bhailalbhai 2010 (258) ELT 36 (Guj)
  • Grand Slam Express Pvt. Ltd Vs. CC, Airport Mumbai 2007 (216) ELT 272 (Tri. Mumbai)
  • Associated Plastics & Rayons Vs. CCE, Vapi 2007 (215) ELT 309 (Tri.Ahmd.)
  • Imran Haji Haroon Rukhmani Vs. CC, Jamnagar 2014 (312) ELT 753 (Tri.ahmd.)
  • Chinku Exports Vs. CC, Calcutta 1999 (112) ELT 400 (Tribunal)
  • Shiv Kripa Ispat Pvt Ltd Vs. CCE & Cus., Nasik 2009 (235) ELT 623 (Tri. LB)
  • Anwar Karim Kar Vs. CC. (ADJN.), Mumbai-l 2009 (233) ELT 498 (Tri. Mum ba i)
  • International Computers Indian Mfr. Ltd Vs. Collr. Of Cus. 1990 (48) ELT 150 (Tribunal)

4. On the other hand Sh. Sameer Chitkara Ld. Additional Commissioner (AR) appearing on behalf of the Revenue reiterates the findings of the impugned order. He further submits that there is no dispute even raised by the appellants regarding their act of improper import without payment of duty on diesel therefore, the confiscation of goods and vessel is legally correct and redemption fine imposed on the company and penalties imposed on the individuals is justified.

5. We have carefully considered the submissions made by both the sides and perused the records. We find that there is no dispute regarding the demand of customs duty, penalty on the appellant company GCMSPL. The Ld. Counsel only contesting the quantum of redemption fine in respect of diesel and vessel and personal penalties imposed on individuals, therefore, we have to deal with these limited As regard confiscation of the goods and redemption fine, we find that the total quantity of diesel seized was admittedly 103.657 MT on which the amount of duty comes to Rs. 8.78 lakhs only. Therefore, the redemption fine of Rs. 13 lakhs imposed on confiscation of diesel oil is not justified, therefore, redemption fine on this count deserved to be reduced. The lower authority has confiscated the quantity of 46.343 MT of diesel oil and imposed redemption fine of Rs. 6 Lakh. This quantity was not available as the same was disposed of therefore, the goods which were not available for seizure the confiscation of non-existent goods cannot be made and no redemption fine can be demanded as held by Larger Bench of CESTAT in the case of M/s Shiv Kripa Ispat Pvt Ltd (supra) which was approved by Hon’ble Supreme Court, reported at 2005 (184) ELT A36.

6. As per this ruling the confiscation of non-existent goods i.e. 46.343 MT of diesel oil is liable to be set aside. As regard the redemption fine on confiscation of the tug, we find that firstly, the valuation of tug was wrongly taken as Rs. 6.75 crores whereas it’s admitted insured value declared is 1.90 Crores. Secondly, once the equal to duty amount redemption fine was imposed on the goods, the redemption fine of Rs. 1.75 Crore in respect of tug is exorbitant and not justified. It is also observed that as per proviso to Section 115(2) the maximum fine on the conveyance can be an amount not exceeding the market price of the goods which are sought to be smuggled or the smuggled goods as the case may be. Therefore, the maximum redemption fine which can be imposed cannot be more than Rs. 51,82,850/-. The Hon’ble Supreme Court in the case of Jain Exports Pvt. Ltd. (supra) held that while imposing redemption fine one must keep in mind the totality of the circumstances and benefit derived by the importer from illegal import. In view of this ruling of the Hon’ble Apex Court, we find that total benefit were sought to be derived by the appellant is Rs. 13 lakhs, which is of duty amount however, the appellant deposited not only the duty amount but also interest and 25% penalty, therefore, keeping in view the Apex Court judgment in the case of Jain Exports (supra), and also facts and circumstances of the present case as discussed above, we are of the view that the redemption fine on tug is very exorbitant and the same needs to be reduced substantially.

7. As regard the personal penalties imposed on the employees, namely, Sh. P P Radhakrishnan and Sh. Hanzel A Malik we find that these person are mere employees and performing their duties as per the instruction of their employer. There is no evidence that they have got any incentive out of the benefit derived by the appellant company. This Tribunal in the case of O P Agarwal (supra) held that employees of company carrying out orders given to them are not person in charge / responsible for conduct of its business, hence not liable for penalty. In the case of M/s Carpenter Classic Exim Pvt. Ltd (supra) this Tribunal has taken a view that employee having acted under the directions of his bosses there being no evidence that he personally benefited from the under invoicing of the goods, the penalty cannot be imposed on him under Section 112(a) of Customs Act, 1962. A similar view was taken by this Tribunal in the case of Associated Plastics (supra) and held that employee have not played on their own violation in evasion of duty, therefore, the penalty is not justifiable. The Hon’ble Gujarat High Court in the case of M/s Amin Chandrakant Bhailalbhai held that the employee do not have knowledge or reason to belief that goods are liable to confiscation under Section 111 of Customs Act, 1962, the penalty is not imposable on employee. In view of the above judgments and the facts involved in the present case related to the employees of the company we find that the employees cannot be penalized as they do not have belief that the goods are liable for confiscation, moreover, they are mere employee of the company working on fixed salary basis and there is no evidence on record that they were benefited by any act of evasion of duty by the company, therefore, the employees are not liable for penalty. As regard the appeal of Sh. Zoharbhai A Mallampattiwala, since the appellant is expired, his appeal shall stand abated. As per our above discussion, we pass the following order:

  • The duty demand, interest and 25% penalty paid is maintained.
  • The redemption fine on tug is reduced to Rs. 8 Lakhs.
  • The redemption fine in respect of goods is also reduced to Rs. 8 lakh s.
  • The redemption fine of Rs. 6 lakhs is set aside as the goods were not available.
  • The appeals of employees Sh. P P Radhakrishnan and Hanzel A Malik are allowed.
  • The Appeal of Sh. Zoharbhai A Mallampattiwala is abated.

(Pronounced in the open court on07.08.2018)

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