ORDER
S.L. Peeran, Member (J)
1. This appeal is filed against Order-in-Original No. 21/2001-CAU dated 31.1.2001 passed by the Chief Commissioner of Customs, Chennai.
2. In C/165/2001, the appellant has imported second-hand printing machine and had sold the same in the local market in violation of actual user condition as laid down in the EXIM Policy. The officers of DRI had taken up the investigation into such imports and misuse of the policy. On search being carried out in the premises of M/s. Orrjay Process and others by the said officers, they found the second-hand printing machines located in those premises and hence they were seized under duly drawn mahazar. The statement of R. Janardhanan was recorded on 1.7.99 who had floated 23 companies in which he had acted as Partner/Director/Proprietor along with his friends/relatives and imported 460 nos. of second-hand printing machines of different varieties. In his statement, he admitted the fact of floating these units and also selling the machines in the local market. The statements of relatives and family members and friends of R. Janardhanan were also recorded. In all these statements, they had admitted that R. Janardhanan had floated the firms and units and financed for importation and for sale of the goods in the market to different buyers. They stated that they had no knowledge of his activity and they were only name lenders. Therefore, the show cause notice dated 24.11.98 was issued to all the 23 persons/firms wherein it was proposed, to confiscate 71 numbers of imported second-hand printing machines valued at Rs. 30,92,439 which were under seizure in terms of Section 111(d) and 111(o) of the Customs Act. The notice proposed that 389 nos. of imported second-hand printing machines valued at Rs. 2,93,74,056 imported and sold in the local market should not be held liable to confiscation under the said provisions of law. The notices also proposed to impose penalty under Section 112(a) of the Customs Act on R. Janardhanan and penalties on other persons. It was also noted and pointed out that vide para 5.4. of the EXIM Policy 1997-2002 second-hand capital goods having residual life of 5 years may be imported by the actual users without licence subject to actual user condition. Further the second-hand capital goods shall not be transferred, sold or otherwise disposed of within a period of 5 years from the date of import except with a prior permission of Director General Foreign Trade. The importers are required to produce declaration to the effect that the second-hand capital goods being imported have a residual life of 5 years and also should subscribe to a further declaration that they are for actual use. These declarations were to be filed at the time of assessment and clearance of goods before the customs authorities.
3. Shri R. Janardhanan in his reply submitted that the policy stipulates that the machines are allowed importation subject to actual user condition; that it is not the case of the department that the machines were disposed of to various other people who are not actual users; that they were sold only to actual users and thus the spirit of the policy condition had been complied with, inasmuch as the persons who imported did not use them but gave to other actual users. He submitted that M/s. Orr Jay Process, M/s. Ambika Printing and M/s. Allied Offset Printers are established units, printing books, calendars and posters; that in respect of other units also the proposals to have the machines installed and do the printing activity were there; that they could not take-off as planned; that over a period of time they were to do actual printing; that the purpose of importation is only for printing and processing and not for selling the machines; that when their units could not take-off, the machines were sold to actual users; that they were under the bona fide belief that selling the machines to another actual user is permissible. Finally, he submitted that of the 460 machines, 389 machines have been disposed of and balance of 71 have been seized by the department and not sold, hence to that extent there is no contravention of the policy; that he has acted in a bona fide manner and imported the machines; that the subsequent disposal to actual users was under the belief that there is no contravention of import laws; that out of the 71 seized machines, 8 machines belong to M/s. Allied Offset Prints and 13 machines to M/s. Diana Reprographics.
4. The Chief Commissioner after due consideration noted that 23 companies/firms were opened/floated by R. Janardhanan in which he was either Partner/Director/Manager alongwith his own relatives and friends. From the statement of Proprietor/Directors/Manager of the firms, it was found that R. Janardhanan had financed, floated these firms and made imports in their names. He had handled the import documents, customs clearances with and through the CHA, and after clearance he sold the goods in the market. It was found that R. Janardhanan had direct control and he was the sole decision making authority. The Chief, Commissioner noticed that 389 machines out of 460 machines had been sold and, therefore, rejected the explanation of R. Janardhanan as without any bona fide and totally illogical ex-facie. The Commissioner noted clear violation of para 5.4 of the EXIM Policy and hence found the allegations made out in the show cause notice to have been proved. Hence, he held the 389 machines sold in the market to be liable for confiscation under the said provisions of law.
5. As regards the 71 nos. of second-hand printing machines which were under seizure, the Chief Commissioner found the same having been imported in different names and the same had been seized from different premises under mahazar. He noticed that none of the machines was at the premises of the importers in whose name the bills of entry were filed. Therefore, he concluded that these 71 machines though not sold were meant for sale in view of the fact that these machines were not at the premises of respective importers and hence there was no bona fide intention in appellants’ in keeping it in different premises. The fact that 389 nos. of machines were sold led to the belief that 71 machines were also meant to be sold and the Chief Commissioner ordered for confiscation of those machines as well. In the result, in the light of several Apex Court judgments, the Chief Commissioner has ordered for confiscation of 389 nos. of imported second-hand machines of assessable value of Rs. 2,93,74,056 sold in the market. As the same were not available physically for confiscation, a fine of Rs. 25 lakhs was imposed on R. Janardhanan. On 71 nos, of .. second-hand machines under seizure valued at Rs. 30,92,439,’the same have also been ordered for confiscation, however, granting option to R. Janardhanan to redeem the same on payment of a fine of Rs. 3 lakhs. Penalty of Rs. 10 lakhs was also imposed on R. Janardhanan. By the same order, the Chief Commissioner has imposed a penalty of Rs. 5000 each on 20 persons. Likewise, R.’Janardhanan has also been imposed with Rs. 5000 for being the partner of M/s. Orr Jay Process, M/s. Anjaneya Graphics, and M/s. Allied Offset Printers respectively. Only. Shri R Janardhanan has filed the appeal in this case for consideration.
6. Ld, Counsel Shri S. Murugappan referred to the grounds of appeal wherein the appellant has submitted that the department has failed to take the fact into consideration that all 23 companies on whose name, the machines were imported, were not floated to sell the second-hand machinery, but they were all intended to be ‘ set up as printing presses and subsequently they all were registered with small scale authorities. However, as the project did not take off, the appellant had to locally sell the machines which in turn he sold to the actual users only. The act was not pre-planned but was due to circumstances. Hence, there was no violation or contravention of EXIM Policy. It was also contended that 389 machines were also sold to actual users. It was contended that appellant was under bona fide belief that machines sold to the actual users also would come within the scope of ambit of actual user and thereby there is no violation of the EXIM Policy. Likewise, he submitted that 71 machines had been kept in the godown and it had not been sold and hence there cannot be a presumption drawn that they were meant for sale.
7. Ld. DR referred to the order and showed that there was no bona fide belief in the action of the appellant. The appellant had deliberately sold all the goods with business venture. Therefore, there being violation of the EXIM Policy, the goods were liable for confiscation and imposition of fine and penalty.
8. We have carefully considered the submissions by both sides and have perused the impugned order. In order to avoid repetition of the facts, it is proper to extract the findings given by the Chief Commissioner in Paras 15 to 24 of the order which is extracted hereinbelow:
15.1 have carefully gone through the records of the case and the submissions made, both written and oral.
16. The issues before me for decision are;
(a) whether the noticees have violated the actual user condition by way of selling the imported second-hand machines in the local market;
(b) whether the machines already sold are to be held liable for confiscation, as alledged;
(c) whether the machines under seizure should be confiscated, and
(d) whether penalties are imposable on the noticees.
17. Coming to the first issue, I find that 23 companies/firms were opened/floated by Shri R. Janardhanan. In all these firms, he is either a partner/director/manager alongwith his own relatives and friends. From the statements of the proprietors/directors/managers of these firms, I find that he is the one who financed, floated these firms and made imports in their names. It was he who handled the import documents, Customs clearances with and through the CHA, and after clearance he sold the goods in the market. The persons behind these firms had only lent their names and nothing more. From the statement dated 1.7.99 of Shri R. Janardhanan, as brought out in previous paragraphs, it is clear that these firms were under his direct control and he is the sole decision making authority. From the facts on record, I find that 460 machines were imported, of which 389 machines were sold. The argument advanced by Shri R. Janardhanan in his reply dated 9.8.2000, or the submissions made by his advocate under letter dated 9.8.2000 that the imports were made in a bona fide manner appear to be totally illogical ex-facie.
18. It is an admitted fact that 389 numbers of second-hand printing machines were imported, cleared and sold in the local market. I find there is no dispute on this point. These machines were imported in the names of different firms and some of the firms had residential addresses. At the time of assessment and clearance they have subscribed to a declaration that the imported second-hand printing machines shall be used by respective firms only and that they would adhere to actual user condition. They filed such declarations and in utter disregard they sold 389 machines in the local market. This is a grave violation of import policy. As per para 5.4 of the EXIM Policy, I find that the importer should adhere to actual user condition and should not transfer and cannot sell the imported machines. Therefore I find that all the noticees have contravened the actual user condition of the import policy. Second-hand machines cannot be imported but for a valid specific licence in the normal course. It is only against the actual user condition of the policy, the importers are permitted to import second-hand printing machines. Otherwise the goods stand to be unauthorised goods. Therefore, I find that in the instant case 389 machines which were imported, cleared conditionally and sold in the market are to be held liable for confiscation under Sections 111(d) and 111(o) of Customs Act, 1962. I find that the goods, have already been sold and not available physically for confiscation. In this case, the cause of action and offence thereof, were subsequent to release of the goods against their own declarations of Customs, with an undertaking to install and use the machines on their own. Such an undertaking is like a bond binding themselves to adhere to the conditional release accorded to them. Sale of goods in the market led to the offence whereby the goods became unauthorised and irregularity established. Therefore, I find that confiscable goods have been sold in the market. Hence, I hold that, in this case, redemption fine is imposable as per the ratio of the judgment of Hon’ble Supreme Court in the case of Mis. Western Components v. Commissioner 2000 (115) ELT278.
19. Coming to 71 numbers of second-hand printing machines which are seized, I find that they were imported in different names. Under mahazar dated 29,6.99, the premises of M/s. Orr Jay Process, 43, Langs Garden Road, Pudupet, Chennai-2 was searched and 21 machines were seized. Under mahazar dated 1.7.99 two premises were searched, one is at 161, V.M. Street, Royapettah, Chennai 14, where 32 machines were seized, and the other is at 31/1, Muthiah Street, Royapettah, Chennai 14, where 19 machines were sezied. From the above I find that none of the 71 machines were at the premises of the importers in whose name the Bills of Entry were filed. From this it is clear that these 71 machines, though not sold, were meant for sale. The fact that these machines are not at the premises of the respective importers knocks down the contention that they were imported in a bona fide way, and they were to be installed. The fact that 389 machines were sold and 71 machines were seized from two godowns, goes to show that not only these machines were not at the declared premises of the said firms but also they remained as such, without being installed. When 389 machines were already sold, I am unable to accept the contention that these 71 machines are meant for installation, particularly when they were not in the respective declared premises. These firms are only name lenders and hardly have any idea as to what a second-hand printing machine is, the import conditions, policy restrictions and post clearance conditions, etc. I find from the statements of the proprietors/directors/managers of the 23 firms that none of them know anything, and the man behind is Shri R. Janardhanan. When 389 machines were already sold in utter disregard of the import policy, I fail to understand that there is any room left for these 71 machines. The plea that the import and sale is a bona fide technical violation is not acceptable. Direct and circumstantial evidence goes to show that these 71 machines are only for sale in the local market. Though the learned advocate claimed release of the seized machines pleading that there is no violation in respect of them. The fact that these 71 machines were seized from two godowns of R. Janardhanan and were at places other than the respective premises, I have no reason to concede to the request. I find that department has discharged enough proof and evidence, both direct and circumstantial to the effect that these machines are only meant for sale. In this regard I find that the ratio of decision of the Hon’ble Supreme Court in the case of Bhoormull v. Collector of Customs 1983 (13) ELT 154 (SC) is applicable, wherein, the Hon’ble Supreme Court held that the prosecution need not prove each and every link in the chain of events, that it is sufficient enough if it has discharged even direct and circumstantial evidence sufficient enough to raise a presumption in its favour, of a fact sought to be proved. Therefore I find that the 71 machines are liable for confiscation under 111(d) and 111(o) of the Customs Act, 1962.
20. Shri R. Janardhanan is the kingpin in the whole case. It was he who floated different firms/companies wherein he is either Partner/Manager/Director along with his relatives, family members and friends. From the statements of different persons, which are on record, I find that all of them have only lent their names and that it was Shri R. Janardhanan who organised, negotiated, imported and handled the Customs documents and after clearance sold the same in the local market. All the statements go to show that he is the final decision maker. From this I find that Shri R. Janardhanan, with full knowledge of the law, violated the import policy provisions and actual user condition and sold the second-hand printing machines in the market.
21. The learned advocate advanced an argument that the initial import itself is not with a deliberate intention for sale; that for circumstances and reasons beyond control the machines were sold to other actual users and that they were under the bona fide belief that such sale to the other actual users is not a contravention of the import policy. I find that actual user condition and adherence thereof is a condition to be fulfilled by the importer himself. The import itself is contingent upon the actual user condition. Therefore I find that the import is a conditioned import. The importer himself should actually utilise the goods so imported. Under the scheme of import control policy, “actual user condition” means that they have to be used by installing them in their own factory/premises and not to be sold/transferred to some other persons as was held by Hon’ble Apex Court in the case of Deputy Controller of Exports and Imports v. K.T. Kosalram, 1999 (110) ELT366(SC). In the case of Abdul Aziz Amirudin v. State of Maharashtra 1999 (110) ELT 225 the Hon’ble Supreme Court held that post import actual user condition is not restricted merely to prohibit the restricted imports at the time of entry but extends also to controlling subsequent disposal of goods so imported and intended utilisation. Therefore I find that Shri R. Janardhanan is liable to penalty under Section 112(a) of the Customs Act, 1962.
22. Coming to other noticees, I find that the story is identical. Everyone of these noticees had lent their names, All of them were either friends, relatives or family members and thus connected to Shri R. Janardhanan. None of them negotiated, nor imported, nor handled the Customs documents. They were Proprietors/Partners/Directors but had not made any investment and have nothing to do with the import or sale of the second-hand printing machines. But all of them knew the activities of Shri R. Janardhanan and lent their names and allowed the goods to be imported and sold and thus abetted in the whole act of importation of second-hand printing machines and sale of the same in the local market. Ignorance of law is not ignorable, and to this extent by their acts of omissions to inform the Customs Authorities, they rendered the goods liable to confiscation under Section 111(d) and 111(o) of the Customs Act, 1962. Therefore they are liable to penalty under Section 112(a) of the Customs Act, 1962.
23. Notice, also proposed penalty under Section 112(b) of the Customs Act, 1962 on Shri G. Srinivasan of M/s. Arrow Shipping and the notice alleged that he has conspired with Shri R. Janardhanan in importing and selling second-hand printing machines, in violation of the policy, and received documents in the names of other firms from Shri R. Janardhanan, delivered the imported machines directly to Shri R. Janardhanan. From the notice I find that the copy of the notice was not issued/endorsed to Shri G. Srinivasan of M/s. Arrow Shipping, the CHA. Therefore I am unable to proceed against him,
24. Having regard to my findings above, I pass the following order.
9. On a careful consideration of the findings, we notice that the Chief Commissioner has taken into consideration all the statements of the persons involved. There is categorical admission made by R. Janardhanan about the modus operandi adopted by him in floating various firms in the name of his relatives and friends of the parties. The said persons have clearly admitted that they were only lending the name and had no knowledge about the manner in which R. Janardhanan was dealing with the imported machines. It has been established by the Revenue that the machines imported 389 second-hand printing machines have been cleared and sold in the local market. Shri R. Janardhanan, the appellant has not produced any evidence to show that it has been sold to the actual user. The burden of showing that it has been sold to the actual user and there were circumstances which compelled him to sell the goods in the market has not been brought out. On the other hand, the admissions clearly indicates that it was sold for profit and to make business out of the imported machineries. The contravention as alleged in the show cause notice and upheld by the Chief Commissioner for violating Para 5.4. of the EXIM Policy 1997-2002 is established. The only question that remains to be seen as to whether the confiscation, fine and penalty is justified. In this connection, the Commissioner has also noted large number of judgments for imposing penalty. We notice that the Apex Court in the case of Hargovind Das K. Joshi v. CC 1987 (14) ECC 233 (SC) : at page 234 have observed that even if goods in question viz. zip fastener could be imported freely for whatever worth it is, the option to give redemption on payment of fine has to be exercised by the concerned officer in accordance with law as is considered appropriate in the facts and circumstances of the case after hearing the appellants. In the case of Dynamatic Hydraulics Ltd. v. CC the Apex Court at page 535 abserved that imposition of quantum of fine is purely an exercise and discretion by a quasi-judicial authority like the Tribunal and such discretion should be exercised judiciously keeping in mind the profit margin of the goods. In the case of Jain Exports v. UOI , the Hon’ble Delhi High Court held that the fine in lieu of confiscation cannot be so exercised as to give a bonanza or profits for an illegal transaction of import. This citation was followed by the Tribunal in the case of Silver Enterprises v. CC & CCE 1989 (44) ECR 770 at P. 774. In the case of Mangala Textiles v. CCE, Rajkot , the Tribunal held that redemption fine is imposable even when goods are no longer in the custody of the department, when the goods have become liable for confiscation. In view of these judgments, we have to clearly hold that the order of confiscation and to grant redemption on payment of a fine in respect of 389 nos. of second-hand printing machine is a correct order and requires to be upheld. This view is supported by the judgment rendered by the Apex Court in the case of Wesfem Components Ltd. v. CC, New Delhi wherein the Apex Court upheld the goods which had been confiscated and released on payment of fine, especially in cases where the goods had been released on execution of a bond and such goods are not produced and or not found. The Apex Court held that the fine imposed is proper.
10. In so far as the confiscation order pertaining to 71 machines is concerned, Ld. Chief Commissioner has taken all the evidence on record to show that the goods had not been installed in the appellant’s premises and had also been shifted to various places. The chain of circumstances clearly prove the intention of the appellant to sell the same and, therefore, the fact that same had not been actually used in terms of the policy has established the charge and goods have become liable for confiscation
11. in so far as the quantum of RF, we notice that in respect of 389 nos. of imported second-hand printing machines, the assessable value has been arrived at Rs. 2,93,74,056 and the redemption fine imposed is less than 10% of the amount i.e. Rs. 25 lakhs. The Larger Bench in the case of Harpreet International has upheld the imposition of 85% of the value as redemption fine. Therefore, the-quantum of fine being only 10% of the total value, it cannot be said that in the facts and circumstances that the fine imposed is on the higher side requiring it to be reduced. Likewise, 71 nos. of second-hand printing machines under seizure has been valued at Rs. 30,92,439 and imposed redemption fine of Rs. 3 lakhs is less than 10% of the value of the goods. Therefore, we find no reason to interfere with the quantum of the RF and confirm the same. As regards penalty, the offence committed by R. Janardhanan is very serious and he has done it with clear intention to make profit by selling the goods in the market against actual user conditions laid down in the EXIM Policy. He, in fact, also sold 389 nos, of imported second-hand machinery. The value of the goods are more than Rs. 3.20 crores. Therefore, the penalty of Rs. 10,00,000 on him in terms of Section 112(a) cannot said to be on the higher side which worked less than 10% and we cannot find fault with the Chief Commissioner for imposing a penalty of Rs. 10 lakhs on R. Janardhanan. Likewise, for other contravention imposition of Rs. 5000 each on R. Janardhanan is not at all excessive and is justified. There is no merit in this appeal and hence we reject the same.