Saheli Synthetics Pvt. Ltd. v. Commissioner Of Customs, Kandla

[Order per : Archana Wadhwa, Member (J)]. - All the three appeals are being disposed of by a common order as they arise out of the same impugned order of Commissioner of Customs vide which he has confirmed demand of duty of Rs. 42,31,027/- against M/s. Saheli Synthetics Pvt. Ltd. along with imposition of personal penalty of Rs. 5 lakhs under the provisions of Section 112 of the Customs Act, 1962. In addition he has confiscated 83,863 L. Mtrs. of Polyester fabrics of foreign origin totally valued at Rs. 82,54,742/- imported by the appellant in excess of the quantity declared by them with an option to redeem on payment of redemption fine of Rs. 20 lakhs. He has also confiscated declared quantity of 78,605 L. Mtrs. of the fabrics under the provisions of Section 119 of the Customs Act with an option to redeem the same on payment of redemption fine of Rs. 15 lakhs. Apart from the above, the adjudicating authority has imposed personal penalty of Rs. 5 lakhs on Shri Ratan Kumar Ramvilas Goel, Director and of  Rs. 50,000/- on Shri Santraj Singh Megaj Singh Tanwar authorized signatory under the provisions of Section 112 of the Customs Act.

2. We have heard both sides, duly represented by Shri Mayur Shroff ld. Advocate and Shri Sanjay Singhal ld. JDR.

3. As per the facts on record M/s. Saheli Synthetics Pvt. Ltd. is a 100% EOU and is engaged in the manufacture of readymade garments. Polyester fabrics, which is the major raw material, is allowed to be imported by the appellant without payment of Customs duty and for the purpose of use in the manufacture of the garments to be ultimately exported, in terms of the provisions of the Notification No. 53/97. In respect of the present import consignment, the appellants declared quantity of polyester fabrics in the Bill of Entry. However, on verification quantity of 83,868 L Mtrs., was found to be in excess than the declared quantity. Authorized representative of the appellant accepted the above excess quantity but deposed that he was not aware of the excess quantity in the container and only Managing Director can explain. The statement of the Managing Director Shri Ratan Kumar Goel, was recorded on 22-8-2001 and subsequently, who accepted and admitted the fact of having imported the excess fabrics and also paid the differential duty of Rs. 42,31,027/-.

4. On the above basis proceedings were initiated against the appellant by way of issuance of show cause notice, which culminated into the impugned order confirming demand of duty and imposing penalties and confiscating the goods.

5. The appellants are not disputing the payment of duty by them. Their main contention is that they having paid the duty even before the issuance of the show cause notice, the goods should not have been confiscated and penalties should not have been imposed upon them. For the above purposes they have relied upon the Tribunal’s decision in the case of Rashtriya Ispat Nigam Ltd. v. Commissioner of Central Excise, Visakhapatnam [ (Tri.-Bang.)] and as confirmed by Hon’ble Supreme Court reported in (S.C.). They have also referred to the Larger Bench decision in the case of Commissioner of Central Excise, Delhi-III v. Machino Montell (I) Ltd. [ (Tri.-LB)], and in the case of Taurus Novelties Ltd. v. Commissioner of Customs, Bangalore [ (Tri.-Bang.)]. It is their contention that Section 28 of the Customs Act, 1962 is pari materia with Section 11A of the Central Excise Act, 1944, and as such ratio laid down by the above referred decisions, though under Central Excise Act, are fully applicable to the facts of the case.

6. As regards confiscation of the declared quantity of fabrics, they have submitted that the said fabrics were packed in carton and the excess carton of polyester fabrics were found along with the declared cartons in containers. The declared cartons cannot be said to conceal the excess cartons and as such cannot be confiscated. Under the provisions of Section 119. Reliance has been placed before the Tribunal’s decision in the case of United State Lines Agency v. Commissioner of Customs (P) Mumbai [ (Tribunal)].

7. Countering the above arguments ld. DR has submitted that the ratio of Machino Montell (I) Ltd. is not applicable inasmuch as in the instant case payment of duty by the appellant was for provisional release of the goods pending finalization of adjudication proceedings and it cannot be said that the appellant on its own case came forward to voluntarily deposit the duty. The appellant has admitted to mis-declaration of quantity resulting in misuse of the benefit available to 100% EOU. They have referred to the following decision where Larger Bench was not followed by the Tribunal in case of mis-declarations that :

(i)      Pee Aar Steels P. Ltd v. CCE [ (All) = 2004 (93) ECC 633 (ALL)]

(ii)    Siva Hygenic Products P. Ltd. v. CCE [(T) = 2005 (68) RLT 771 (T)]

(iii)   Rolcon Engg. Co. Ltd. v. CCE [ (T)]

(iv)   CCE v. S.P. Tobacco P. Ltd. [(T) = 2005 (98) ECC 707 (T)]

(v)     Rinkoo Processors Pvt. Ltd. [ (T)]

(vi)   CCE v. Deepak Spinners [ (T)]

(vii)  Brakes India Ltd. v. CCE [ (T)]

(viii) Jasch Ind Ltd. v. CCE [ (T)]

8. As regards confiscation of the declared quantity of the goods, they have submitted that the said quantity was used for concealing the excess goods found in the containers and thus has been rightly confiscated under Section 119 of the Customs Act, 1962. Reliance has been placed upon the Tribunal’s decision in the case of Ashoka Traders v. Collector of Customs [ (Tribunal)].

9. After giving our careful consideration to the submissions made by both the sides, we uphold the confirmation of demand of duty of Rs. 42,31,027/- as not contested by the appellant. As regards personal penalty of Rs. 15 lakhs on M/s. Saheli Synthetics Pvt. Ltd., it is seen that Shri Ratan Goel in his statement before the officers has admitted importation of excess quantity than the one declared in the bills of entries. The appellants contention that there could not be any motive to import excess of raw material inasmuch as no Customs duty was leviable in terms of Notification 53/97-Cus., does not forward his case inasmuch as the excess of non declared quantity could have been diverted to the domestic market instead of using the same in the manufacture of the export goods. Shri Ratan Goel has clearly admitted in the statement that he was aware of the excess quantity load in the containers as per his telephonic talk with the supplier. In spite of that the said excess quantity was not declared. As such, we are of the view that the ratio of the decision relied upon by the ld. DR which are to the effect that deposit of duty before the issuance of the show cause notice cannot be made the basis for non imposition of penalty, are not applicable to the facts of the instant case where such duty demand has arisen on account of intervention of the department. In the case of Rashtriya Ispat Nigam Ltd. relied upon by the appellant, duty was paid voluntarily by the assessee, whereas in the instant case the fact of mis-declaration is established and it is only thereafter, the appellant paid the duty to get the release of the fabrics. The intention on the part of the appellant to evade can be inferred without any hesitation from the fact that there was mis-declaration in the quantity of the fabrics, which fact also stands accepted by Shri Ratan Goel. In such a situation they are required to be met with penalty and cannot be allowed to go scot-free on the mere ground that, on being pointed out they deposited the duty. The ratio of the Allahabad High Court decision in the case of Pee Aar Steels (P) Ltd. is that imposition of penalty has nothing to do with the timing of the show cause notice. As such, we are of the view that penalty has been rightly imposed upon M/s. Saheli Synthetics Pvt. Ltd. However, keeping in view the fact of deposit of duty before the show cause notice and considering the same as a mitigating factor, we reduce the penalty from Rs. 15 lakhs to Rs. 7.5 lakhs.

10. As regards confiscation of the excess found goods, the appellant have not contested their liability to confiscation. Accordingly, we uphold the same. However in the facts and circumstances of the case, we reduce the redemption fine from Rs. 20 lakhs to Rs. 7.5 lakhs. As regards confiscation of the declared quantity of fabrics, we take note of the Tribunal’s decision in the case of Ashoka Traders v. Collector of Customs [ (Tribunal)]. In Para 9 of their judgment the liability to confiscation under Section 119 has been discussed. For better appreciation we reproduce below the said para.

“The next issue to be considered is whether Section 119 could be invoked in the case of 41 bales wrapped in black wrapper in respect of which the goods imported are as per description in the documents. According to the Concise Oxford Dictionary ‘conceal’ means to hide completely or carefully — to keep secret — to disguise — to keep from telling. Under Section 119 of the Customs Act the object used for concealing is liable for confiscation. In a case like this where 2 identical lots one without contraband and another with contraband have been imported, the object of importing the other lot is to disguise the contraband to get it passed. In such a situation it cannot be envisaged that only the materials which have been physically used for covering contraband or hiding them are sought to be covered  Section 119. In the context of dictionary meaning referred to above, the items which have been brought simultaneously along with the contraband goods to disguise and camouflage the contraband are also covered by the term ‘concealment’. Even without going into this aspect, this lot is liable for confiscation under Section 111(d) of the Customs Act. In view of our findings that the lot with the additional markings L/C is the one sought to be cleared under the Bill of Entry, the other lot for which a B/E has not been filed and no licence produced is liable for confiscation under Section 111(d) of the Customs Act. We, therefore, uphold the Collector’s order of confiscation of both the lots”.

The facts in the above decision are parallel to the facts in the present case. As such, by applying the ratio of the above decision we uphold the confiscation of the declared quantity under the provisions of Section 119 of the Act, but reduce the redemption fine to Rs. 5 lakhs.

11. As regards personal penalties on Shri Ratan Goel, it is seen that he was the person actively involved in importation of the excess quantity and was a ware of the said fact. He has also deposed in his statement that he was aware of the fact that it is an offence under the Customs Act. In these circumstances, we are of the view that a separate penalty on Shri Ratan Goel should be upheld. However keeping in view, the overall facts and circumstances of the case we reduce the penalty from Rs. 5 lakhs to Rs. 2 lakhs.

12. As regards penalty of Rs. 50,000/- on Shri Santraj Singh Megaj Singh Tanwar, we do not find any justifiable reason to impose penalty upon him inasmuch as in his very first statement he has deposed his unawareness about excess quantity. Even Shri Ratan Goel has admitted that apart from him no other person for their company was aware of the fact of excess importation. In view of the above we set aside the personal penalty to Rs. 50,000/- upon Shri Santraj Singh Megaj Singh Tanwar.

13. In a nutshell all the appeals are disposed of in the following  manner :-

(i)      Duty of Rs. 42,31,027/- is confirmed against M/s. Saheli Synthetics Pvt. Ltd., as not contested.

(ii)    Penalty of Rs. 15 lakhs imposed on M/s. Saheli Synthetics Pvt. Ltd. is reduced to Rs. 7.5 lakhs.

(iii)   Confiscation of excess found non-declared goods is upheld but redemption fine is reduced to Rs. 7.5 lakhs.

(iv)   Confiscation of declared fabrics is upheld under the provisions of Section 119 of the Customs Act, but redemption fine is reduced to Rs. 5 lakhs.

(v)     Penalty of Rs. 5 lakhs on Shri Ratan Kumar Ramvilas Goel is reduced to Rs. 2 lakhs.

(vi)   Penalty of Rs. 50,000/- on Shri Santraj Singh Megaj Singh Tanwar is set aside.

14. All the above appeals are disposed of in the above terms.

(Pronounced in Court on 19-7-2005)