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Gandhi Associate Bhaskar B. Shah Jabs International Pvt. Ltd. v/s Commissioner of Customs (EP)


Company & Directors' Information:- JABS INTERNATIONAL PRIVATE LIMITED [Active] CIN = U51900MH1997PTC110640

Company & Directors' Information:- BHASKAR INTERNATIONAL PVT LTD [Active] CIN = U25202HR1997PTC033615

Company & Directors' Information:- S P ASSOCIATE PRIVATE LIMITED [Active] CIN = U51505OR2005PTC008097

Company & Directors' Information:- SHAH GANDHI AND CO PVT LTD [Active] CIN = U99999MH1948PTC006750

Company & Directors' Information:- GANDHI SHAH LTD. [Strike Off] CIN = U99999MH1949PLC007053

    Appeal No. C/20, 32, 33 of 07, in-Original No. 124 of 06/CAC/CC/KAP

    Decided On, 20 February 2017

    At, Customs Excise Service Tax Appellate Tribunal West Zonal Bench At Mumbai

    By, THE HONOURABLE MR. M.V. RAVINDRAN
    By, MEMBER (JUDICIAL) & THE HONOURABLE MR. C.J. MATHEW
    By, MEMBER (TECHNICAL)

    For thte Appellant: S.P. Mathew, for Gandhi Associates J.C. Patel, B.B. Shah & Jabs International, Advocates. For the Respondent: R. Kapoor, Commr (AR).



Judgment Text

M.V. Ravindran, Member (Judicial).

1. These three appeals has been filed by M/s Jabs International Pvt. Ltd, its director Shri Bhaskar Bhanuvadan Shah and M/s Gandhi Associates. The Appeals are directed against the Order-in-Original No. 124/06/CAC/CC/KAP dt. 28.09.2006 passed by the Commissioner of Customs (EP), Mumbai.

2. The relevant facts that arise for consideration are that pursuant to investigation conducted by the DRI authorities Show Cause Notice was issued to M/s Aroma International alleging that they had imported spices without payment of duty in order to use them in manufacture of export goods. However in violation of the said conditions the imported spices were instead diverted to domestic market. In order to show that the imported spices has been used in processing/ manufacturing of export goods, M/s Aroma International mis-declared the export goods to be ‘Spices Powder’ whereas the investigations revealed that the same were ‘Chilli Powder’. Accordingly it was proposed to demand duty, imposition of penalty and confiscation of imported and export goods from M/s Aroma International and its Partner. The Appellant M/s Jabs International Pvt. Ltd. at the relevant time were discounting Bills of export of M/s Aroma International and in few cases the goods manufactured by them were exported through M/s Aroma International. M/s Jabs International and its director Shri Bhaskar Bhanuvadan Shah were also made co-noticee and it was proposed to confiscate the goods exported and to impose penalties upon them. The proposal against M/s Jabs International and its director Shri Bhaskar Shah were made on the ground that in respect of 15 export consignments for which the orders has been received by them and which were fulfilled by exports effected by M/s Aroma International, while the goods exported were Chilli powder, M/s Aroma International misdeclared the goods in the shipping bills as ‘Spices Powder’. The adjudicating authority after following due process of law held that 51 export consignments were mis-declared by M/s Aroma International and thus are liable for confiscation under Section 113 (d) and 113 (i) of the Customs Act, 1962 readwith Section 11 (1) of Foreign Trade (Development and Regulation) Act, 1962 and Rule 11 & 14 of Foreign Trade (Regulation) Rules 1993. He held that as the goods are not available for confiscation a fine of Rs. 1,25,00,000/- is imposable on M/s Aroma International and M/s Jabs International P. Ltd jointly and severally. He further held that since 51 export consignments are liable for confiscation consequentially he imposed penalty of Rs. 2,50,00,000/- on M/s Jabs International P. Ltd. and Rs. 1,00,000,00/- on Shri Bhaskar Shah under the provisions of Section 114 (i) & 114 (11) of the Customs Act. Further a penalty of Rs. 50,00,000/- was imposed upon M/s Jabs International under the provisions of Section 112 (a) of the Customs Act, 1962on account of imported spices liable for confiscation. The Other Appellant M/s Gandhi Associates who had purchased ‘Chilli Powder’ from M/s Aroma International and cleared the same for export, it was alleged that the same were exported by M/s Aroma International declaring the same as ‘Spice Powder’. It was held by the adjudicating authority that the export consignments are liable for confiscation in terms of Section 113 (d) and 113 (i) of the Customs Act. Accordingly a fine of Rs. 10,00,000/- was imposed under Section 125 of the Customs Act. A penalty of Rs. 1,00,00,000/- was also imposed on Gandhi Associates under Section 114 (i) & (ii) & 114 (A) of the Act.

3. The Ld. Counsel appearing for M/s Jabs International and Shri Bhaskar Shah submits that in respect of part of the export consignments, Aroma International had misdeclared the description of the export goods as ‘Mixed Spices Powder’ or ‘Red Hot Concentrate of Mixed Spices Powder’ etc instead of ‘Chilli Powder’. However fact remains that Appellant was not concerned with all such consignments as apparent from the show cause notice itself. Out of the 51 impugned consignments the Appellant was concerned only in case of 15 consignments and that too only to the extent that in case of these 15 consignments the export orders were received by M/s Jabs International from the foreign Buyers but the exports were made through M/s Aroma International. He produces the export related documents and submits that as apparent from the said documents which are part of relied upon documents of show cause notice it is apparent that there was no misdeclaration by M/s Jabs International or Shro Bhaskar Shah. All the export documents pertain to M/s Aroma International with no involvement of the Appellants. That their export invoices clearly showed the goods as ‘Chilli Powder’ and even the documents submitted to the bank for collection of export proceeds also described the goods as ‘Chilli Powder’. He submits that it is only M/s Aroma International who has misdeclared the goods in the Shipping Bill as ‘Spice Powder’.

3.1 He submits that Shri Piyush Meghani, Partner of M/s Aroma International who was earlier working with the Appellant as ‘Trainee’ started his own independent business and thus approached the Appellant M/s Jabs International for getting the export documents discounted as M/s Aroma were facing financial crunch. The Appellants agreed for discounting the export bills at the rate of 2%. Accordingly, upon Aroma International endorsing the Bills of Lading and/ or Mate Receipt in the Appellant’s favour. The Appellants thereafter approached the Bankers with the export documents which were sent through the Appellant’s Bankers for collection with instructions to hand over the documents to the foreign buyers against payment. Pending such collection of payment from the foreign buyers, the Appellants paid 98% to Aroma International. The difference of 2% was earned by the Appellants as discounting commission. The Export goods at the time of export by M/s Aroma were examined and containers were stuffed and sealed in presence of Customs Preventive Officer at the premises of the 100% EOU, Aroma International. He submits that in all 15 consignments the Appellants did not file any documents with the department/ customs authorities mis declaring the goods. That providing discounting facility in respect of the exports is not an act or omission which renders the export goods liable to be confiscation. The Appellants were in no way concerned with the said mis-declaration in the Shipping Bills filed by Aroma International. The Appellants were only concerned with the discounting of the export documents and not with the goods or the filing of the Shipping Bills. Accordingly, for any mis-declaration of the description of the goods in the Shipping Bills by Aroma International, the Appellants cannot be held liable for penalty under Section 114. The mis-description of the goods in the Shipping Bills was an act or omission of Aroma International and not of the Appellants. He submits that the contention of the revenue that in invoices submitted by the Appellant, the goods were mis declared is wrong as since as far as they are concerned, they had correctly described the goods as Chilli Powder in the documents sent by them through the Bank. The failure on the part of Aroma International to declare the said goods as Chilli Powder in the Shipping Bill filed by them, cannot render the Appellants to be liable to penalty since the Appellants were not associated with the filing of the Shipping Bills. The Appellants have not submitted any Invoice to the customs for the export clearance where the goods were mis-declared. That the export invoices on the basis of which the fine and penalties has been imposed against them were never submitted to customs authorities at the time of exports or thereafter and were neither used for export of goods or for discounting of export bills and hence they cannot be held liable for any punitive action.

3.2 The Ld. Counsel has submitted copies of Shipping Bills of export, copy of invoice, mate receipt, bill of lading. He submits that at the time of export all the documents contained description of goods as ‘Chilli Powder’ only. He submits that as far as confiscation of export goods is concerned the confiscation of 51 export consignments and imposition of redemption fine upon them and M/s Aroma International jointly is concerned, the same is illegal as they were concerned with only 15 export consignments and in those 15 export consignments also they have not made any misdeclaration before customs and no document pertaining to them was filed. That no documents containing misdeclartion of goods was submitted by them or was there documents and hence it cannot be said that they have made any misdeclaration of goods. Therefore they cannot be burdened with fine in lieu of confiscation of export goods.

3.3 He submits that the Commissioner on Page 30 of the impugned Order proceeded on a mere conjecture and surmise by holding that there was some arrangement other than that of discounting of the export documents which was not so evident. There is absolutely no evidence to establish some arrangement other than that of discounting of the export documents. Neither is there any such evidence nor has the Commissioner spelt out what other arrangement was there and he has proceeded on a mere suspicion and conjecture. There is no illicit gain or benefit derived by the Appellants by undertaking the discounting of the Export documents. The discounting of the export documents for a commission of 2% is a perfectly legitimate activity for which the Commissioner has unjustly visited the Appellants with massive penalties totaling to Rs.4 crores. Therefore imposition of penalty under Section 114 (i) and (ii) is illegal as it displays complete lack of balance in the approach of the Commissioner.

3.4 He further submits that penalty under Section 112 (a) in respect of imports of Spices made by Aroma International made against them is not sustainable as the Appellant had no role whatever to play in respect of imports of Spices by Aroma International. The Spices imported by the 100% EOU, Aroma International have been held to be liable to confiscation on the ground that the same were not used by Aroma International for the export production but were diverted in the local market as may be seen from Para 47.C of the impugned Order. There is not even a shred of evidence to show that the Appellant was in any way involved in the import of Spices by Aroma International or in its alleged diversion/ sale into the market. There is no evidence or statement of any person that the Appellant was involved in the alleged diversion/ sale in the local market of the spices imported by Aroma International. That the Commissioner has imposed penalty on the Appellant only on the ground that the Appellant had trained Piyush Meghani in spices trade and helped him in arranging for factory premises. He submits that mere fact that Piyush Meghani was prior to 1997 working with the Appellant as trainee (without pay) cannot be a ground for imposition of penalty under Section 112 (a) for the alleged diversion of the spices imported by firm of Piyush Meghani during 1997-2000. Likewise helping someone in arranging for factory premises cannot be a ground for imposition of penalty. There is no evidence or statement of any person that the Appellant was involved in the alleged diversion/ sale in the local market of the spices imported by Aroma International.

4. Ld. departmental representative on the other hand,? would draw our attention of the findings recorded by the lower authority. He would submit that M/s Jabs has submitted different set of export invoices to the Bank showing goods as Chilli Powder and to the department showing description of goods as Mixed Spices Powder during investigation. That initially Shri Bhaskar Shah has stated that they have discounted 22 documents but later stated that they have discounted 66 consignments of M/s Aroma International. That Shri Piyush Meghani had earlier worked as trainee with M/s Jabs International. Two of the imported consignments of M/s Jabs were sold to M/s Aroma on High Seas sale basis and some of the export consignments were arranged from M/s Jabs. In some cases the amount was paid by M/s Jabs to M/s Aroma International after discounting of bills which shows their relationship and which shows involvement of M/s Jabs International in manipulation of documents. M/s Jabs International helped M/s Aroma in getting factory premises and also arranged local supplies in some cases. There was variation in actual price of goods and that discounted by them. Till year 2000, the office space was shared between Aroma and M/s Jabs. He submits that in his statement before the investigation authorities Shri Bhaskar Shah has confessed that the bills of exports containing wrong description were prepared under compulsion of EOU obligations and the said statement was not retracted. He further submits that description of goods in Bill of Lading were different than that exported. That Shri Bhaskar Shah has abetted in misdeclaration of export goods and thus liable for penalty. He relies upon the judgments in case of M/s Saccha Sauda Pedhi Vs. CCU (Import), Mumbai 2015 (328) ELT 609 (TRI), Naresh J sukhwani Vs. UOI 2002 ‘ TIOL ‘ 387 ‘ SC ‘ CUS, Dinkar Y Ghanekar Vs. CCU, Mumbai 2016 ‘ TIOL ‘ 241- CESTAT ‘ MUM, Vishnu Kumar Vs. CCU, New Delhi 2010 ‘ TIOL ‘ 333 ‘ HC ‘ DEL ‘ CUS.

5. Contradicting the submission of the Ld. DR, the Counsel Shri Patel takes us through the records. He submits that none of the export documents pertained to M/s Jabs International and they had no role in export of goods. Their role was only post export when they discounted the export bills of M/s Aroma International. He takes us through all the export documents to show that all the export documents including shipping bills and the documents submitted to the Bank for discounting contain the description of goods as ‘Chilli Powder and even in those documents there was no misdeclaration of goods. He submits that the goods were exported from the premises of Aroma International under the supervision of the preventive officers posted at EOU. That sharing of office space or helping in getting factory place or bill discounting cannot be construed to abetting of misdeclaration. That there is no excess price charged towards export as the prices mentioned in shipping bill is matching with the export bills presented to the banks. He submits that all negotiations for exports were by M/s Aroma and only in 15 consignments their exports were routed through M/s Aroma. He also submits that in case of shipping bills where the goods were returned, the export order were received by them but only exported through M/s Aroma and that the shipping bills contained correct description of goods as ‘Chilli Powder’ only. He submits that it is common feature of business that third party export is permissible. No export benefit was claimed by them. He submits that the statement given by Shri Bhaskar Shah cannot be basis for alleging misdeclaration as the same is in isolation with no supporting records/ evidence of their contumacious conduct. He submits that only on the basis of statement of Shri Bhaskar Shah in absence of evidence of having made mis-declartion of export goods, he cannot be saddled with penalty.

6. Ld. Counsel appearing for M/s Gandhi Associates would submit that they had not filed any document at the time of export and their all the documents show the goods as ‘Chilli Powder’ only. They had not availed any export benefit. That there is no evidence of them being involved in export of goods by misdeclaring the same and the impugned order is illegal.

7. We have considered the submissions made by both the sides and perused the records. We find that the allegations of misdeclaration of export goods is mainly against M/s Aroma International and its partner who is not in appeal before us. In these appeals we are concerned only with fines and penalties imposed against M/s Jabs International, its director Shri Bhaskar Shah and M/s Gandhi Associates.

7.1 We find from the records that the adjudicating authority has mainly imposed fine and penalty against M/s Jabs International and Shri Bhaskar Shah on ground of misdeclaration of export goods and diversion of imported goods by M/s Aroma International. We find that M/s Aroma International had imported goods without payment of duty showing its purported use in manufacture of export goods. It was found during the investigation that the imported goods instead of such use were diverted into local market. Further it was found that in order to show the fulfillment of export obligation the goods were shown to have been processed/ manufactured out of imported goods and were mainly declared as ‘Mixed Spices Powder’ etc. whereas the same were ‘Chilly Powder’. The allegation of misdeclaration against M/s Jabs International is also based upon the above grounds. We find that as far as the said Appellants are concerned they were concerned with the export of 15 consignments. The goods were exported by M/s Aroma International after due verification by the officers under their supervisions. We find that all the exports were effected by M/s Aroma International against their fulfillment of export obligation and the shipping bills, export invoice, bill of lading were prepared by M/s Aroma International only. M/s Jabs International or Shri Bhaskar Shah was not at all concerned or involved in any of the exports nor has filed any documents at the time of export. In such case we are of the view that when M/s Jabs International or Shri Bhaskar Shah were not involved in any of the exports nor prepared any documents misdeclaring the export goods, in that case they cannot be saddled with any charges of misdeclaration. Moreover we find that except 15 export consignments which were exported by Appellants through M/s Aroma International, the Appellant were not even remotely concerned with remaining export whereas the fine and penalties has been imposed against them on all such exports which is absolutely illegal. It is also a fact on record that even the export bills submitted by them to the Bank for the purpose of discounting of export bills also contain the description of export goods as ‘Chilli Powder’. Thus in such a case the charges of misdeclaration against the Appellants cannot be made against Appellant.

7.2 Though we find that the allegation against M/s Jabs is that they had given export bills containing description of goods as ‘Spices Powder’ whereas the copies received from the discounting banks showed such consignments as of ‘Chilli Powder’, however it is seen that the invoices containing the description of goods were never submitted to any custom authorities at the time of export or to the bank. These documents were not produced before any customs authorities even post export. We find that all the export documents submitted to the authorities at the time of export involving M/s Jabs contained the description of goods as ‘Chilli Powder’ only. We find that the export bills, bill of lading and all documents of those 15 export consignments submitted to the Bank are of ‘Chilli Powder’ only. In such view of the fact we find that M/s Jabs International had on no occasion misdeclared the goods at the time of exports.

7.3 In case of allegation of valuation of goods as pointed out by the Ld. Advocate we find that the prices of goods stated by Shri Bhaskar Shah in his statement is matching with the prices in bills of exports discounted by the bank, hence in such case it cannot be shown that the excess prices were quoted by the Appellants. We find that Shri Piyush Meghani earlier being trainee at M/s Jabs International or M/s Jabs helping M/s Aroma International in getting factory space or sharing of office space cannot be construed as M/s Jabs Involvement in alleged misdeclaration unless and records or documents submitted at the time of exports shows their involvement. Further we find that there is no allegation or instance showing benefit accruing to M/s Jabs International or Shri Bhaskar Shah in alleged misdeclaration by M/s Aroma. It is more so as none of the export benefit has been accrued to M/s Jabs International. Further it is not forthcoming on record either from the investigation or from the statements of Shri Bhaskar Shah or Shri Piyush Meghani that they had colluded with each other to carry out any misdeclaration. The instances of involvement of M/s Jabs is limited only to the extent of helping in business to M/s Aroma International which cannot be considered as involvement in mis-declaration. We also find that Shri Piyush Meghani, Partner of M/s Aroma International in his statement has nowhere named M/s Jabs International or Shri Bhaskar Shah as party to the misdeclaration. It is a common feature that third party exports takes place and is a normal business transaction. Only for the reason that some of the exports of M/s Jabs International were through M/s Aroma and subsequent to exports there has been manipulation by M/s Aroma does not make M/s Jabs International or Shri Bhaskar Shah as hand in glove since no evidence of misdeclaration by them is coming on record. To bring home the charges of mis-declaration it is required that such mis-declaration was done by the person for export of goods. We find that in export of goods, M/s Jabs

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International or Shri Bharat Shah had no role to play. The export of goods took place from the factory of M/s Aroma International under the supervision of the jurisdictional officers of said EOU and the appellants were at no stage involved in exports. The Appellant came into picture only at the time of discounting of bills and at that stage also no misdeclared documents were filed. In such case we are of the view that the allegation of mis-declaration of export goods against M/s Jabs International or Shri Bhaskar Shah are not sustainable. In view of our observations we thus hold that the redemption fine against the Appellant under section 125 of the Customs Act and penalties under Section 114 (i) and (ii) against M/s Jabs International and Shri Bhaskar Shah are not sustainable. 7.4.We further find that penalty has also been imposed against the Appellant M/s Jabs International under Section 112 (a) on the ground of diversion of imported goods by M/s Aroma International. However we find that neither in the show cause notice or the impugned order the role of Appellants for diversion of imported goods is forthcoming. Since the Appellant has no role in diversion of imported goods by M/s Aroma, therefore no penalty can be imposed upon the Appellant. 7.5 As regard penalty against M/s Gandhi Associates we find that they had acted merely as exporter of such goods and the goods were declared by them to be Chilli Powder only. Further no evidence of misdeclaration by them is appearing on record. Their role was limited only to the extent of showing the export goods as belonging to them and get some export income. This act on their part in no ways lead to inference that they intended to misdeclare any export goods. Hence there is no reason to impose fine and penalties against them. 7.6 We thus hold that the impugned order in as much as it imposes fine and penalty against M/s Jabs International Pvt. Ltd its director Shri Bhaskar Shah and M/s Gandhi Associates is not sustainable and is set aside. 7.7 Accordingly, in the facts and circumstances of this case, we hold that the impugned order in as much it relates to M/s Jabs International Pvt. Ltd, Shri Bhaskar Shah and M/s Gandhi Associates is unsustainable and is liable to be set aside and we do so. The impugned order is set aside and all the three appeals are allowed with consequential reliefs, if any.
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