TaxTMI 
TaxTMI 
2009 (9) TMI 156
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....rder-in-original and being interconnected, they are being disposed off by a common order. 2. The necessary facts that arise for consideration are in pursuance of information received by the officers of DRI, that one Shri J.P. Mody had floated several firms and had indulged in smuggling of large quantities of ATMs started investigations. The said ATMs were subsequently sold to Citi Bank and Hongkong & Shanghai Banking Corporation Ltd., (HSBC) at Mumbai. On search of the premises of the firms floated by Shri J.P. Mody, the authorities recovered incriminating documents. Further, during the course of investigation, statements of various persons were recorded, which included the statements of Shri Ramamrutham of Philip (India) Ltd. and Shri K. Basu Patnaik and Shri J.P. Mody,s etc., On conclusion of investigation, the lower authorities came to the conclusion that Shri J.P. Mody had imported 10 ATMs and 5 Terminal Computers in the name of his firms, indicated in the books on records that the same was purchased locally, and subsequently sold to M/s. Peico Electronics & Electricals Ltd., Bombay, who subsequently sold the same to HSBC/Citi Bank. The show cause notices were issued to 13 n....
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....TM in CKD condition, as they did not contain the entire parts of the ATM. It is his submission that they sold imported consignments to various people. It is the submission that the said goods were assessed finally by the authorities on presentation of the bill of entry at the time of clearances. As regards the confirmation of demand of duty in the case of modems, it is the submission of the Counsel that no evidence has been brought on record by the authorities that all parts required for a completion of modems are imported. It is his submission that there is a serious violation of principles of natural justice in this case as the adjudicating authority has not given documents, which are relied upon and which were sought by them. It is also the submission that the request for cross examination of Assistant Commissioner, who cleared the consignments at the first instance was not granted to them. It is the submission that the certificate issued by the experts i.e., Chartered Engineer has not been considered by the adjudicating authority. Hence, it is his submission that the matter may be remanded back to the adjudicating authority to reconsider the issue afresh. 4. Shri J.P. Mody a....
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.... their submission, leave alone recording any findings. It is his submission that without considering their submission, adjudicating authority could not have confiscated the machines and imposed penalty on them. It is his submission that the entire order-in-original is verbatim reproduction of the show cause notice and has not considered the representation made by them. It is his submission that the bank was not at all concerned with the importation of said goods nor they had entered into contracts for import of ATMs in the guise of parts. It is his submission that the bank was not therefore required to ascertain either in law or otherwise how the goods were imported as long as they were being supplied by a local supplier, i.e., M/s. Peico Electronic & Electricals Ltd., (M/s. Philips India). It is his submission that the entire order-in-original could not bring out any role played by his clients as to aiding and abetting the import of the said ATM and terminal computers and, hence, they are not liable for penalization and the confiscation is also unwarranted. 6. Shri Anil Balani, Advocate, appearing for the applicant Shri AA Ansari submits that the applicant Shri Ansari is an emp....
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....nt and, hence, there cannot be any dispute. It is his submission that goods imported should be assessed in the manner it they are presented. It is his submission that the parts themselves are not prohibited items. He submits that the decision of the Hon'ble Supreme Court in the case of Phoenix International would not apply in this case as in that case they were presented together, which could amount to complete shoes and there was also element of intention to evade as both the parts were imported in the same container. 7. Ld. JCDR in support of the adjudication order submits that the applicant Shri J.P. Mody, the main person behind the J.P. Group, was litigating this matter in High Court in various writ petitions. He draws our attention to the order-in-original for this submission. It is his submission that entire reading of the show cause notice would clearly indicate that there was a concerted effort on behalf of the applicant Shri J.P. Mody, his employees and M/s. Peico Electronics & Electricals Ltd., to import ATM in parts to evade payment of duty on full ATM/Modems. He takes us through the entire show cause notice to bring home this proposition. It is his submission, that t....
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.... completely knocked down in Belgium, different house HWA were prepared to show that the goods, which are being imported are parts. It is his submission that statements indicated that Philips Holand sold the ATM to a company in Belgium. As regards the issue of modems, it is his submission that they were clearly misdeclared and, hence, the entire adjudication order would be incorrect. It is his submission that there is no violation of principles of natural justice by not giving the cross examination as the entire case is proved based upon the record and the statements. 8. We have considered the submissions made in detail and perused the records. 9. It is noted from the submissions made by the all the applicant's counsel that the impugned order is challenged on various grounds and one of them is violation of principles of natural justice. We find that the entire issue in this case is regarding the import of entire machinery mis-declaring as parts and components. As the issue is based on the records, we find that the appeals themselves, could be disposed off at this juncture on the issue of violation of principles of natural justice. We waive the condition of pre-deposit of the a....
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....r, not over a period of time. It is seen that total number of bills of entry in dispute are 248 nos., obviously all these bills of entry were not presented together. Important question that has to be answered if parts and components are imported under different bills of entry over a period of time, can it be held that it was import of entire machine. Adjudicating authority needs to consider this issue keeping in mind the law as is settled by the Apex Court in the case of Tarachand Gupta & Bros - 1983 (13) E.L.T. 1456 (S.C.) and in the recent case of Sony India Ltd. - 2008 (231) E.L.T. 385 (S.C.) = (2008-TIOL-183-SC-Cus). It is seen that the appellant M/s. Peico Electronics & Electricals Ltd., has been taking this point before the adjudicating authority during the course of proceedings. We find force in the appellants submission that the adjudicating authority ought to have dealt with the outcome of cross-examination of Assistant Commissioner Shri S. Mohan. 14. Adjudicating authority has also observed that appellant has delayed the proceedings for 13 years on one pretext or other by interpreting the Hon'ble High Court's order in a casual manner. This we find highly unacceptable a....
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.... Sd/- (M.V. Ravindran) Member (Judicial) 21. [Per: K.K. Agarwal, Member (T)]. - I have perused the above order of my learned brother. Since I am not in agreement with the same, I am recording a separate order. Though briefly, the facts involved in the case has been summarised by my learned brother, I still feel it necessary to add certain facts to bring out how a calculated fraud has been played to circumvent the provisions of import policy which prohibits import of complete ATM and only permits import of parts of ATM. 22. The stay petitions filed by various applicants concerns three order-in-originals out of which two relates to import of ATM and ATMPs and the third with the import of modems. I shall first discuss the two order-in-originals dealing with the import of ATM and ATMPs. 23. Briefly the facts are that Philips India planned to introduce ATM somewhere in 1985-86 and received orders from Citibank as well as Hong Kong & Shanghai Bank (HSBC) in India. Their principal, Philips Holland had exclusive world marketing right except in USA for marketing ATMs manufactured by Diebold of USA under their Philips brand name. The ATM Processor/computer terminals/ATM....
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....als Ltd. In his statements, he admitted about the agreement entered into with Philips wherein Philips were to identify the consignment, decide the price and his job was to clear the machine through customs and give them back to Philips. He suggested to Philips that Exportek, a firm in Belgium will invoice the ATMs/ATMPs differently and that firm will also show lesser price in invoices which will enable the JPM Group company to make more profit by saving custom duty. That after clearance the goods were to be supplied back to Philips India who will install the ATMs in the customers places. He admitted that the JPM group has shown the ATMs to have been locally purchased from certain firms, but that was not true and the bills were bogus. He also admitted the JPM group had neither the factory nor capability to manufacture ATMs and had wrongly stated that the components imported were sold to local parties and ATMs and controllers were supplied after procuring it from local parties. He also admitted that his employee Ansari had gone to Belgium to inspect the consignment and has signed all the Bills of entry. He admitted that he was directed by Philips India to take delivery of packages fr....
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.... also confirmed the FOB price of the machines on the basis of documents seized from the premises of Shri Mody. 29. Shri Ramamrutham of Philips India in his statements stated that Philips India considered the probability of importing ATMs against REP licences or in SKP/CKP condition but were advised against this as they did not have industrial licence for manufacture or assembly of ATMs and that Mody, on enquiry, agreed to arrange the import and clearance of ATM/processors and for finalising the modalities, he went to Holland, that CIF price of the ATMs based on the price list of Philips Holland was communicated to Mody who agreed to charge a price after multiplying the CIF value by 2.9 which included the duty and licence premium, if any. He admitted that companies controlled by J.P. Mody was to source and supply the equipment from Philips Holland to Peico for eventual supply to HSBC bank and Citibank. 30. Shri Basu, an employee of Philips India, in his statement has stated that as Philips India could neither manufacture ATMs nor import them, they accepted the offer of Mody to supply ATM kits to Philips India in its original packing for its installation at site and that the SK....
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.... evidence to show that Shri Mody and his companies have played a fraud on the revenue by undervaluing and misdescribing the goods to overcome the import policy restrictions. No purpose will be served by remanding the matter when the very documents which have been admittedly lost are being again directed to be resupplied. Shri Mody had asked for cross examination of departmental officers only, which is totally irrelevant because even if the officers had examined the goods and found them to be in order, may be by lack of knowledge, by negligence or otherwise, the conclusive evidence available as discussed above, clearly establishes that what was imported was a complete ATM, whose value was misdeclared to evade duty. 33. My Ld. Brother has suggested for remand of the entire order to the adjudicating authority on the ground that the relevant documents were not supplied, cross examination of Asst Commissioner was not allowed and it is not clear as to whether the entire ATM was imported in one consignment or different consignments over a period of time. I am not in agreement with this view. Firstly, I find that the order was reserved and during hearing remand aspect was never before t....
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....Hong Kong bank that a complete ATM was installed. The appellants have shown total inability to indicate the specific parts which were missing. On a query from the bench, they were asked to give a list of the various parts which constitute an ATM and list of parts, which were imported and the parts which were indigenously procured, but they showed their inability to do so. There is no evidence regarding manufacture of any parts in India and the persons from whom Hindustan Engineering Corporation and others are supposed to have got the ATMs, i.e. Mutha Steel and Welfab Engineers have denied supplying anything nor do they have any industrial licence to manufacture any such parts. Shri Ansari has also admitted that what was imported under different bills of entry were complete ATMs. 34. The other ground for remand is regarding not discussing the expert opinion furnished by the appellants which stated that the goods declared in the bills of entry did not constitute a complete ATM. This evidence is of no meaning as firstly it has been taken after 15 years of import when the fact is that the ATMs have been installed and working at the banks premises. These experts have never seen the m....
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....gs in respect of only penalty imposed on him. The entire facade was created by Shri J.P. Mody in order to overcome the licensing requirement as well as for undervaluation of goods in order to evade payment, of legitimate customs duty. It was M/s. HEC, which was the front company of Shri J.P. Mody dealing with the supplier, the buyer and the intermediary in Belgium. Prima facie therefore, it is the HEC who is liable to the duty as well as penal action. We are supported in our finding by the observation of the Hon'ble Supreme Court in the case of Phoenix International Ltd. reported in 2007 (216) E.L.T. 503 in para 11. In view of this I hold that prima facie case has been made out for demand of duty and imposition of penalty. Since the applicant has not challenged the under-valuation of the goods neither in the grounds of appeal nor at the time of hearing of the stay petition in spite of specific query being put by the bench, the entire duty liability is required to be paid as pre deposit and the goods are to be held to be correctly confiscated. 36. As regards Peico Electronics, it was submitted by counsel Shri Nankani that goods have to be assessed in the form in which they have b....
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....plicity in the matter. In view of this, prima facie, penalty is imposable on Peico and its officers who knew of all this conspiracy. 38. As regards HSBC bank, it was contended by Shri Shroff that they were in no way concerned with the misdeclaration of price and description of goods as they have placed order for supply of Philips brand of ATMs which have been supplied to them for which the agreed price has been paid. The commissioner's order nowhere brings out any fact from which an inference can be drawn that they were also party to the misdeclaration. I prima facie find merit in the contention of the bank as there are no such findings in the Commissioner's order and accordingly hold that they have been able to make a prima facie case so as to call for complete waiver of pre deposit of penalty imposed on it. 39. As regards Ansari who was represented by Shri Balani, it was submitted that there is no material in the order to show that Ansari was aware of the fact that all the parts put together will constitute a full ATM and his statement after being shown the catalogue he has stated that they will form an ATM. Therefore, in such a situation no penalty is imposable. This defen....
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....been sold to Dipali Electronics. On import, the goods were described as electrical, parts of control panels and control switches claiming classification under 8538.10 under the Customs Tariff. The value declared was almost 1/10th of the prevailing CIF value. The goods were initially cleared at the declared price and classification claimed by the importer HEC on whose behalf the bills of entry were filed and it was during the course of investigation relating to import of ATMs and ATMPs that a similar modus operandi in respect of modems was also discovered. Accordingly, show cause notice was issued proposing to confiscate the goods as import of modems was prohibited and for misdeclaring the value of the goods and duty was demanded on modems by classifying under heading 8471.99 of the Customs Tariff. The show cause notice has been adjudicated wherein the commissioner has demanded duty amounting to Rs. 1,26,27,675/- from HEC and has imposed a penalty of Rs. 75 lakh each on HEC, Dipali Electronics and Peico Electronics. A personal penalty of Rs. 45 lakh each has been imposed on Shri J.P. Mody and S.J. Mody. 42. Ld. Advocate for HEC, Shri Sekhon accepted that what was imported was a m....
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.... I therefore waive the pre-deposit of the entire penalty imposed on Dipali Electronics and stay recovery thereof till the disposal of the appeal. 45. As regards Peico Electronics, the submissions are same as were in the case of import of ATM/ATMPs and in view of the reason stated therein which are equally applicable in the present case, penalty is liable to be imposed on Peico Electronics. For the same reason, penalty is also imposable on Shri J.P. Mody who was the mastermind of the entire fraud. Penalty is also prima facie imposable on Shri S.J. Mody as he has dealt with the goods imported by HEC which have been held liable to confiscation. 46. In view of above, I direct the following applicants to pre-deposit a sum indicated against their names within 8 weeks of receipt of this order and on such payment there shall be waiver of deposit of the balance amount of duty and penalty imposed and recovery stayed thereof till the disposal of the appeal. Hindustan Engineering Rs. 63 lakh towards duty and Corporation Rs. 37 lakhs towards penalty. Peico Electronics Rs. 20 lakhs Shri J.P. Mody Rs. 9 lakhs Shri Suketu J. Mody Rs. 5 lakhs Sd/- (K.K. Aga....
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....the other appellants on the ground of abetment of the offence committed by M/s. Hindustan Engineering Corporation. From the submissions made by both sides, it appears to me that the contentious issue arising at this point of time is whether a remand of the case at stay-stage is warranted in the facts and circumstances of the case. The learned Member (Judicial) of the regular Bench broadly found three reasons for remand: (a) copies of Bills of Entry containing observations recorded by the assessing authority were not given to the assessee, M/s. Hindustan Engineering Corporation, (b) the certificates issued by two Chartered Engineers, who were appointed by the assessee to inspect the goods and report on the identity of the goods vis-à-vis the declaration in the Bills of Entry were rejected by the adjudicating authority on the ground that such inspection was made in the absence of officers of the department; (c) the plea made by M/s. Hindustan Engineering Corporation to cross-examine certain functionaries of Philips (India) Limited (erstwhile Pieco Electronics & Electricals Ltd.) was not accepted by the Commissioner. The learned Member (Judicial) prima facie found substance in these ....
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....connected parties submits that the decision in Govind Sharma's case cannot be applied to the facts of this case. It is submitted that, in that case, neither of the Members of the regular Bench decided to remand the case upon conclusion of hearing of stay applications. One Member disposed of the appeals finally on merits while the other Member took the view that the appellants should be directed to make pre-deposits under Section 129E of the Customs Act. Counsel submits that the question whether the case should be remanded at stay stage was not there before the regular Bench which dealt with Govind Sharma's case. On the other hand, the learned JCDR submits that, in Govind Sharma's case also, hearing on stay applications was concluded, the matter was reserved for orders and the learned Member who first recorded order proposed to dispose of the appeals finally by reducing the quanta of penalties. The other Member chose to dispose of the stay applications by directing pre-deposits. It was in this scenario that the difference of opinion arose in Govind Sharma's case. In the instant case, the learned Member (Judicial) of the regular Bench remanded the case to the lower authority for de n....
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.... to show-cause notices, they had specifically prayed for permission to appoint Chartered Engineers to inspect the goods and determine their identity vis-à-vis the declarations made in the Bills of Entry. Had such a plea been made in the reply to show-cause notices, there would not have been any chance of inspection of the goods by the assessee's self-appointed Chartered Engineers behind the back of the department. The above grievance is, therefore, bereft of merits. Yet another grievance raised by M/s. Hindustan Engineering Corporation is that they were not allowed to cross-examine certain functionaries/employees of Philips (India) Limited who are also appellants in some of the captioned appeals. The case of the Revenue as made out in the show-cause notices is that the imports in question were made at the behest of Philips (India) Limited. This case was based on certain statements given by the functionaries/employees of that company. The assessee wanted to demolish this case by cross-examining the functionaries/employees of the above company and therefore, in their reply to the show-cause notices, they made a request for cross-examination. It appears from the records that they had....