TaxTMI 
TaxTMI 
2007 (4) TMI 524
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....Jain Aggrieved over the Final Order passed by this Tribunal, Revenue filed appeal under Section 130A of the Customs Act to decide the question of law stated in their appeal and to set aside the Final Order of the CESTAT in so far as M/s. MNS Exports Ltd. and Shri Narayana Bhatt are concerned. Shri Vikram Jain also appealed to the High Court. 2. The following questions of law were raised before the Hon'ble High Court. (i) Whether the Tribunal was right in holding that the first respondent company was not responsible for the acts and omission of its authorized representative contrary to the provision of Section 147(2) of the Customs Act? (ii) Whether the Tribunal was right in totally exonerating the first respondent from any duty liability, on the basis that the act of the authorized representative was not within its knowledge and hence Section 147(2) of the Act is not applicable to the present case?" 2.1 After hearing the parties, the High Court remanded the matter to this Bench with the following observations in CSTA No. 24/2005 (Appeal of the Revenue) : "8. Accordingly, the appeal is allowed and the impugned order is ....
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....st of his argument is that M/s. MNS Exports Private Ltd. are the importers in this case in the light of the Customs Act and also the various citations furnished by him. Further, he emphasised the point that the appellants are liable for the acts of their servants in terms of Section 147 of the Customs Act. He has also stated that the onus to prove the contrary as required under Section 147(2) of the Customs Act has not been discharged. He urged that the Commissioner has elaborately discussed this point. He stated that all the three employees who filed the Bills of Entry in the name of the company were paid employees of the appellant company. They assumed the status of servants while the appellant company has the status of master. Therefore, the laws relating to vicarious liability for wrongs committed by servants will devolve upon the appellant company as master. 8. Shri G. Shiva Dass, before arguing the case, gave a very detailed submission along with various case-laws and relevant extracts from the Indian Contract Act as commented in various standard books on the subject. Shri Kiran Javali also submitted a written detailed submission along with the case-laws relied on him. ....
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.... MNS Exports Private Ltd., would be cleared duty free by the three employees with the help of Bhaskar who would deliver it to Vikram Jain. Vikram Jain would export the same items to Singapore with the intention to show these exports as fulfillment of DEEC licence obligation. Thus, the process of re-cycling continued. Vikram Jain was having a company by name M/s. Texworth International. The exports were in the name of M/s. Texworth International. These facts have not been disputed. Even as per the investigation, the 12 consignments which were imported in the name of M/s. MNS Exports Private Ltd. never reached the premises of M/s. MNS Exports Private Ltd. However, the Show Cause Notice dated 22-10-1999, has been issued inter alia to M/s. MNS Exports Private Ltd. and Shri Narayana Bhatt, Managing Director of M/s. MNS Exports Private Ltd. As far as M/s. MNS Exports Private Ltd. is concerned, the Show Cause Notice issued demands the following amounts :- (i) An amount of Rs. 7,29,572/- under Section 72 of the Customs Act in respect of goods which were clandestinely removed and kept outside the licenced premises. In the Final Order passed by this Bench, the ....
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..... The connected import documents in all the cases were destroyed so as to avoid detection. Shri Bhaskar, paid commission for the clearances made as per his instructions at the rate of 6.50 per mt. (III) Shri H. Bhaskar, in his statement has confessed and admitted to have indulged himself in the said act and also has confirmed having received a commission of Rs. 11 per mt from Shri Vikram Jain and having paid commission to the employees of M/s. MNS Exports Pvt. Ltd. at Rs. 6.50 per mt. His statement also explains as to how he got hold of the import documents from Shri Vikram Jain and arranged for clearance of the impugned consignments with help of M/s. MNS Exports staff. (IV) Smt. Shilla Shree has made a payment of Rs. 15,000/- through cheque bearing No. 007345 dtd. 13-11-97 of UTI Bank, Magrath Road, Bangalore, to Shri Raviprakash towards the commission payable by Shri Bhaskar for the clearance of import consignment effected on his instructions. (V) The car bearing registration No. KA 01 P 1094 was used for transportation of silk fabric weighing around 120 KGs out of one of the consignments cleared pertaining to AWB No.....
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....s in their name and then divert the same? In fact, in the course of the hearing before the Tribunal, we wanted to see the authorization given by M/s. MNS Exports Private Ltd. to their employees for our perusal. The learned Consultant appearing for Revenue expressed his inability to provide the same. The 12 consignments have been sent by M/s. Myer's from Singapore. No nexus between M/s. MNS Exports Private Ltd. and M/s. Myer's has been established. But the investigation reveals that Shri Vikram Jain visited Singapore for negotiation with M/s. Myer's. When the imported consignments were exported after re-cycling, they were exported to M/s. Myer's of Singapore. Thus, the goods were neither ordered by M/s. MNS Exports Private Ltd. for import nor have they been brought to the bonded premises. How can we say that they are the importers of the consignments? The documents which were necessary for clearance of imported goods were given by Shri Vikram Jain to Shri H. Bhaskar, who in turn, gave them to the employees of M/s. MNS Exports Private Ltd. This is also clear from the investigation and these facts have not been disputed. The Hon'ble High Court of Bombay, in the case of M. Shashikant &....
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.... part of what he does, which is within his authority, can be separated from the part which is beyond his authority, so much only of what he does as is within his authority is binding as between him and his principal." An illustration also has been given under this above section. We reproduce the same. "A, being owner of a ship and cargo, authorises B to procure an insurance for 4,000 rupees on the ship. B procures a policy for 4,000 rupees on the ship, and another for the like sum on the cargo. A is bound to pay the premium for the policy on the ship, but not the premium for the policy on the cargo." It was held in Radheshyam Agarwal v. UOI & Others - AIR 1980 Madhya Pradesh 95, that Railways were not liable in a case where fictitious receipts were issued by Railway servants even without receiving the goods. The Railways Administration cannot be held liable for the act of its servants in issuing a railway receipt without delivery of the goods for carriage by the consignor to the railway administration, even on the basis of illustration (b) to Section 238 of the Contract Act. The ratio of this case is also squarely applicable to the present case. It is on record that M/s. MNS Exp....
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....In that case, the Custom House Agent mis-utilised the amount received from Hetero Drugs Ltd. for making payments on behalf of other importers. The Department demanded duty from M/s. Hetero Drugs Ltd. It was held that the importer is liable only for bona fide acts of CHA and not those which are in excess of their authority. We are reproducing para 12(a), (b) and (c) of the above decision. 12. (a) The liability of a principal i.e. the appellants-company herein, for the acts committed by the agent i.e. CHA at Chennai will only be with reference to the bona fide acts committed by the agent and not for the mala fide acts committed by the Agent or the Custom House Officers. On examination of Section 147 of the Customs Act, 1962, it is found that Section 147(1) of the Customs Act contemplates that an agent can on behalf of the owner, importer or the exporter do things which the Act requires the owner, importer or the exporter to do. Section 147(2) thereof stipulates any such thing done by an agent shall, unless the contrary is proved, be deemed to have been done with the knowledge and the consent of such owner importer etc. Therefore, an importer is liable to establish that the acti....
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....hikant & Company and others v. UOI reported in 1987 (30) E.L.T. 868 (Bom.). Therefore, provisions contained in the proviso to Section 147(3) of the Customs Act would come into play if the CHA, had undertaken the malicious activity, has been settled by the following decisions : (a) KM Mohamed Ghouse & Co. v. ACCE [1979 (4) E.L.T. J683 (Mad.)] (b) Commissioner of Customs, Cochin v. Trivandrum Rubber Works Ltd. [1999 (106) E.L.T. 9 (S.C.)] (c) Pilmen Agents Pvt. Ltd. v. Commissioner of Customs, Madras [2000 (126) E.L.T. 79 (Mad.)] From the above, it is very clear that the principle is liable only for the bona fide acts of the agent and not otherwise. In the present case, the three employees have not acted in a bona fide manner in the import of consignments in the name of M/s. MNS Exports Private Ltd. For personal gains, they had betrayed, M/s. MNS Exports Private Ltd. and committed fraud. In these circumstances, we cannot hold M/s. MNS Exports Private Ltd. liable for the acts of their employees. 9.5. In the criminal complaint filed before the Special Court for Economic Offences, there was no allega....
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....ith M/s. Myer's and that Shri H. Bhaskar, the Customs Inspector had taken delivery of the goods. There is also evidence in the form of statements recorded from the transporters to the effect that the goods were delivered in the premises of Shri H. Bhaskar. The Commissioner himself, in para 107 of the impugned order, has held that Shri Vikram Jain, in collusion with Shri H. Bhaskar got the consignments cleared in the name of M/s. MNS Exports without payment of duty by mis-declaration and received the same for the purpose of recycling and exporting in order to achieve export obligation under DEEC. Merely because the import documents were filed in the name of M/s. MNS Exports Private Ltd., one cannot hold that they are the importers. 9.7. The learned Consultant contended that it is not a legal necessity for an importer to be the owner of the imported goods. He referred to Section 46 of the Customs Act and urged that as per sub-section (4), an importer, while presenting a Bill of Entry is required to subscribe a declaration as to the truth of the contents of such Bill of Entry and produce supporting documents relating to the imported goods. In the present case, the authorized emp....
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....denying the exemption Notification is the fact that ITI are engaged in commercial activity. The question of the definition of 'importer' was never raised in that case. It is not a case where there is a dispute as to who is the importer. The reliance on this case is not appropriate. 9.10. In the Dytron (India) Ltd. case, the goods were imported by a company which went into liquidation. The Apex Court held that the Official Liquidator would be liable to pay the Customs Duty because the Official Liquidator represented the company. This decision is not at all relevant for the present case. 9.11. In the Chaudhary International case, it was held that when the Bill of Lading, Import documents, Bill of Entry and DEEC Pass Book are in the name of M/s. Chaudhury International and goods also consigned to them, then they are the importers. It was held that the other firm which placed order with the foreign supplier in the name of Chaudhury International and was willing to get the goods released on payment of duty and fine is not the importer. This case is also not at all relevant. In this case decided by CEGAT, New Delhi, it is on record that one firm placed order with the foreign ....
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....enalty on him under Section 112(a). We only want to comment on the poor investigation of the departmental officers in not taking even a single statement from a person whom they want to penalise under the Customs Act. 10.2. We have also given a detailed finding with regard to the applicability of Indian Contracts Act and Section 147(2) of the Customs Act, 1962. A fraud committed by an agent which does not fall within his authority does not affect the principal. Section 147(2) is not applicable, as in the present case it has been proved that the fraud committed by the employees was not within the knowledge and consent of M/s. MNS Exports Private Ltd. In view of the above facts which have been elaborated in our findings, we strongly hold that M/s. MNS Exports Private Ltd. is not responsible for the acts and omissions of its employees in terms of Section 147(2) of the Customs Act. 10.3. We also do not hold M/s. MNS Exports Private Ltd. as importer under the Customs Act in respect of the 12 consignments in their name fraudulently by Vikram Jain. No nexus has been established between M/s. MNS Exports Private Ltd. and M/s. Myer's Ltd. who exported the goods to Indi....
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....uments to Raviprakash. (ix) The fax copy of the Invoice and AWB were in the name of M/s. Myer's (Fairdinkum) Pte Ltd. consigned to M/s. MNS Exports Private Ltd. (x) After clearance from Customs, Raviprakash delivered the goods to his residence (Bhaskar's at Mediwala No. 7, 1st D Cross, Maruti Nagar, Madiwala, Bangalore). (xi) After receiving the goods at his residence, he used to telephone Shri Vikram Jain about the arrival of the goods and Vikram Jain used to arrange for collecting the goods. (xii) After receiving the goods, Shri Vikram Jain used to pay him Rs. 11.00 per metre out of which he sued to pay Rs. 6.50 per metre to Shri Raviprakash and Shri Prasad in some hotel. (xiii) Similar consignments of silk fabric of different quantity were got cleared from Customs without payment of duty belonging to Shri Vikram Jain in the name of M/s. MNS Exports Private Ltd. (xiv) About 5-6 consignments were delivered at his Madivala residence and the rest at his present residence at No. 82, BTM Layout, II Stage, N.S. Palya, Bangalore. (xv) The import documents were not received by him from Raviprakash or Prasad. (xvi) Shri V....
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....he last consignment which was received by him was lying for about 3 months. On being specifically asked about the export of goods and re-import of the same, Shri Jain stated that he wanted to avail DEEC benefit and Income Tax benefit. He had applied for transferability Certificate with JDGFT which was still pending. Further, he has stated that Shri Bhaskar contacted him and made enquiries as to why he had stopped export and re-import of silk fabrics, for which he replied that since the commission which was being paid for the said transaction was very high and as he was not making much profit, he stopped the transaction. He also stated that he did not know M/s. MNS Exports Private Ltd. On seeing the Air Way Bill bearing Nos. 058 3750 7466 dated 21-5-1998 for a quantity of 400 Kgs., he identified the said goods imported vide above referred AWB as the same goods which had been exported by him vide Invoice No. 11 dated 13-5-1998 in respect of S/B No. 19730 dt. 15-5-1998. Shri Vikram Jain was shown other AWBs and admitted that the goods imported in all the AWBs shown to him pertained to the reimportation of the export goods made by him under various Invoices. He also stated Shri Bhaskar....
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....reproduced below :- "42. Now, therefore, Shri Vikram Jain of M/s. Texworth International, Bangalore is hereby required to show cause to the Commissioner of Customs, Central Revenues Building, PB No. 5400, Queen's Road, Bangalore as to why: (1) Penalty should not be imposed on him under Section 112(b)(ii) of the Customs Act 1962 in as much as he connived and colluded with Shri H. Bhaskar, Inspector of Customs, Bangalore, in getting the imported goods cleared without payment of duty in the name of M/s. MNS Exports (P) Ltd., Bangalore, a 100% EOU and received the impugned goods which was originally exported by him under DEEC Scheme." 11.4. The Adjudicating Authority has given his findings with regard to Shri Vikram Jain in paras 103 to 110 of the Adjudication Order. Para 103 deals with the various contentions raised before the Adjudicating Authority by Shri Vikram Jain. He had contended that there is no evidence to connect the goods imported in the name of M/s. MNS Exports Private Ltd. to him. 11.5. After considering the statements of Shri Bhaskar and the employees of M/s. MNS Exports Private Ltd., the Commissioner has come to the following conclu....
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....ctions of Shri Vikram Jain and Bhaskar. We also hold that merely because a statement is retracted, it cannot be said that it is voluntary. We have to look into the circumstances and appreciate the evidence available. We want to reiterate that the charges are not based only on the statements. There is ample documentary evidence in the form of Air Way Bills as the Air Way Bills have been identified by Shri Vikram Jain as those of consignments which are recycled. There is also a perfect link when the contents of all the statements recorded are put together. We have already stated that after going through all the statements, the Adjudicating Authority had drawn his conclusion in para 97 of the Adjudication order. While dealing with the appeal of M/s. MNS Exports Private Ltd., we had reproduced those conclusions. It is also seen that Smt. Shilla Sree, Wife of Shri Bhaskar, has made a payment of Rs. 1,500/- through cheque bearing no. 00732 dated 13-11-2007 of UTI Bank, Mangalore to Shri Ravi Prakash towards the commission payable by Shri Bhaskar for the clearance of import consignment effected on his instructions. 11.7. In the course of de novo hearing before the Tribunal, the lear....
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....s, other than prohibited goods, to a penalty [not exceeding the duty sought to be evaded on such goods or five thousand rupees], whichever is the greater; The Commissioner, in his Adjudication Order, has clearly held that the goods imported in the name of M/s. MNS Exports Private Ltd. and cleared free of duty for re-cycling purpose are liable to confiscation under Section 111 of the Customs Act. Since, there is clear evidence that Shri Vikram Jain was concerned in dealing with goods which are liable for confiscation, the penalty imposed on him under Section 112(b)(ii) is sustainable. The fact that no duty has been demanded from him on the imported consignments cannot be a reason for exonerating Shri Vikram Jain and holding that he is not liable for penalty under Section 112(b)(ii). 11.9. The learned Counsel has contended that in all, 4 Show Cause Notices had been issued to Shri Vikram Jain, in the following manner :- (a) Show Cause Notice to MNS Exports and Others. (b) Show Cause Notice to Kanika Apparels and others. (c) Show Cause Notice to Next Fashion and others. (d) Show Cause N....