ORDER
Gowri Shankar, Member (Technical)
1. The facts involved in this group of appeals can be divided into two situations. The first set of facts relates to import of goods made against specially impressed licences issued to Vikram Projects Ltd. These licences were for import of plastic granules. Pet Plastics Ltd., a unit in the Kandla Free Trade Zone, had placed orders on Vikram Projects Ltd. for supply of articles of plastics which were to be utilised by the former towards fulfilment of its export. In accordance with the terms of the policy, therefore, the licence that was issued to Vikram Projects Ltd. permitted to import without payment of duty in terms of the relevant notification. Vikram Projects Ltd., it is stated, imported quantities of plastic raw material. It is alleged that it sold these goods in the market utilising these raw materials in the manufacture of the plastic articles which it had supplied to Pet Plastics Ltd. Investigations by the department led to the conclusion that a part of this quantity was sold to Adani Exports Ltd. at Ahmedabad through Lalit Sanghavi, a broker. Notices were therefore issued to Pet Plastics, Vikram Projects Ltd., Vikram Shah, its director, Adani Exports Ltd., Gautam Adani, its chairman, Saurin Shah, its general manager, and Vijay Vakil, director of Pet Plastics. The Commissioner has demanded duty from Vikram Projects Ltd. and proposed penalty on it and others under Section 112 of the Act. Part of the order of the Commissioner impugned in this appeal deals with this issue.
2. In the part of the order dealing with this aspect, the Commissioner has found that the various persons became liable to penalty for dealing with the goods which were confiscated and imposed penalty on them. No appeal has been filed by Vikram Projects ltd. or its director. Appeals filed by Hitesh Vakil and Vijay Vakil, employee and director respectively of Pet Plastics Ltd. have been dismissed for failure to comply with the stay order of the Tribunal to deposit duty.
3. The submissions of Mr. V.S. Nankani, advocate, on behalf of Adani Exports Ltd., Gautam Adani and Saurin Shah are as follows. The company had been approached by Lalit Sanghavi, a broker at Ahmedabad, for names of possible buyers for polypropylene which he stated was available for sale. The company did not purchase the material but its employees gave Lalit Sanghavi names of possible buyers. Lalit Sanghavi presumably went ahead and contracted these persons. Neither the company nor any of these employees had any role in this. In any event, none of the persons had been informed that the plastic materials in question were imported without payment of duty and were not permitted for sale. These goods at the relevant time could be imported freely and it was on this belief that they responded to the broker. No part of the sale proceeds has been received by any of the employees. Hence none of them is liable to penalty.
4. Mr. J.C. Patel, counsel for Lalit Sanghavi, contends that he did not have any knowledge that the goods were not permissible to be sold, dealing with it that they were freely importable and transfer of sale. The departmental representative contends that Sanghavi’s statement indicates that the goods were sold through Adani Exports Ltd. The buyers of the goods gave the sale proceeds to Gautam Adani who passed on the amount to Vikram Shah. Saurin Shah, at the behest of his chairman, assisted Sanghavi in the sale of the goods. Hence the company and these two persons and Sanghavi are liable to penalty.
5. The departmental representative also relies upon the statement of 15.7.1997 of P.V. Rao, manager of Vikram Projects who had named Adani Exports and another and Lalit a third person as a buyer of plastic goods cleared duty free. He also relies upon the judgment of the Supreme Court in Naresh J. Sukhawani v. UOI 1996 (83) ELT 258. He further contends that the statement dated 9.10.1998 of P.A. Vasudevan, the Custom House Agent at Kandla, stating that documents for clearance of the imported goods were given to him by a representative of Adani Exports and subsequent instructions regarding delivery given Rajesh Adani, a director of Adani Exports and Lachubhai, an employee of this firm, go against the appellants.
6. Mr. Nankani answers by saying that the Commissioner has not relied upon the statement of Vasudevan in coming to his conclusion about the liability to penalty of these persons. He further contends that Vasudevan in his statement has only said that Rajesh Adani and Lachubhai had given instructions for clearance of delivery of 819 tons of low density polyethylene, the subject matter of order-in-original 23/02. No notices were issued to these persons for their involvement in this regard. Their statements therefore cannot be relied upon.
7. In coming to his conclusion that the appellants before us are liable for penalty, the Commissioner has relied upon the statements of Gautam Adani of 27.9.1997 and Saurin Shah of 4.8.1998. In his statement, Gautam Adani states, in response to a question put to him, that evidence so far gathered indicates that about 2000 tons of polypropylene had been “received and sold under instruction given by you or your firm as follows. He had not met Vikram Shah. His import department has told him that there was some transaction of amount to Lalit Sanghavi but they were not aware that consignment was that of Vikram Shah or any other partner.” This material was sold directly to different parties in Delhi who will make direct payment to Lalit or act by his direction. He was not exactly aware of under which scheme the goods were imported. He also denies the suggestion made to him that Lalit had said that he had received the payment for the goods directly from Adani’s firm. Saurin Shah in his statement effectively reiterates what Gautam Adani said, that since Lalit Sanghavi was a broker for their company, he, Sanghavi, arranged for buyers in the market for purchase of about 900 tons. The payment was made by buyers directly to Vikram Shah through Lalit. Since however that the action from the buyers may be routed through Lalit, he says that they have not purchased any material from Vikram. All that the company received was a commission. lalit says that he arranged meeting between Vikram Shah and Gautam. Thereafter he has not seen the goods, “all the buyers were made by Adani in cash to Vikram and have received my brokerage …” I was told by Vikram that goods was sold to Adani. He says specifically, “I say that to my knowledge these plastic raw materials were imported by Vikram under DEEC Import Licence.” Vikram Shah in his statement had said that it imported about 5300 tons of plastic raw material which was “sold in the market either directly or through broker. The payments for these sold goods were received in cash. The details of the brokers when the goods were sold are as under to my best knowledge:-” Thereafter says “I do not know to whom these goods were sold by the broker. Payment received in cash from the broker, the commission also in cash.” We thus find with regard to Adani Exports and two employees significant contradictions in the statements of parties. Even ignoring the contradiction in Vikram Shah’s statement naming the persons to whom he sold the goods and thereafter saying that he did not know to whom eh sold that. Assuming that he said that he sold the goods to Adani Exports, the denial by Gautam and Saurin that they received the goods has to be taken into account. Sanghavi himself said that after he faded out of the picture, he arranged the meeting with Vikram and Gautam and that he was told by Vikram that the payments were made directly by Adani to Vikram Sha. The involvement of Adani Exports and its employees is just based essentially upon the statement of Vikram Shah. Vikram himself in his number of reference to the transaction does not specify how he met Adani abroad and whether the sale was militated or done directly. We do not think that this has been made out for imposition of penalty on Adani Exports and its employees.
8. We now turn to the other side of transaction. In this group of appeals, covered by order Nos. 24/02 to 28/02 dated 28.3.2002 of the Commissioner, the subject matter is the liability to duty and confiscation of a quantity of plastic material imported against licences which were issued to various persons such as Chaganlal & Sons and Navinchandra Premji, and liability to penalty of various persons. The Commissioner records that these licences were in fact obtained at behest of Mansukhlal C. Desai and his son Rajesh Desai. Orders for supply of these goods were placed on the foreign supplier by Adani Associates. These licences were utilised in order to clear through customs quantities of goods which were ordered by the Gujarat State Export Corporation, or Gujarat State Small Industrial Development Corporation, and sold these goods on high seas to these companies. Finance for the import transactions was made available by Adani Exports Ltd., acting as an agent of the Gujarat State Export Corporation in terms of the provisions of import policy. It is not in dispute before us that after these goods were purchased on the high seas and cleared through customs by its group of companies, they were sold to various persons in the market without fulfilling the export obligation placed on the licensees. In his order, the Commissioner has demanded duty from these licensees. He has imposed penalties on Adani Exports and also on Gautam Adani, Sauren Shah, its employee and Adani Associates and the broker Dhiren Shah.
9. The contention of Mr. Nankani are as follows. Both Adani Exports and Adani Associates were engaged inter alia in the import and sale of plastic and dealt with various persons in the trade. Rajesh Desai run into Gautam Adani at a social function and told him that he was looking for some plastic materials to buy. Gautam Adani referred him to Sauren Shah, general manager of Adani Exports. Sauren Shah arranged for high sea sales to be made by the two corporation of the Gujarat for plastic raw material that they had arranged to import. Accordingly the goods were sold on the High sea group of companies run or controlled by Mansukh Desai/Rajesh Desai. This part of the transaction has not been alleged to be contrary to law. The Commissioner has not imposed penalty on the two corporation of government of Gujarat on whom notice has been issued on this regard. If the principal has been exonerated it would follow that Adani Exports and Adani Associates who acted as agents arranging finance and placing orders and supply would also be entitled to be exonerated. In any event, these companies of the Gujarat government by themselves have not been accused for abetting the sale contrary to law, of the goods that were purchased on the high seas by Mansukh Desai and Rajesh Desai and cleared without payment of duty. As for this allegation, he contends that on behalf of Gautam Adani that as a chairman he was not concerned with day today affairs and he had no role to play either in the purchase of the material or its subsequent disposal. When he was questioned subsequently by the officer of the DRI regarding he stated that he had only come to know of this sale of goods, the fact that the goods are sold in the open market. Gautam Adani had also gone on to say that to the best of his knowledge Sauren Shah, the General manager introduced the traders of brokers to Rajesh Desai as referred Sauren Shah. He had been approached by Rajesh Desai for purchase of raw material on the high seas. He had been in touch with Rajesh Desai with regard to the material which the later wanted to buy, imported by the corporations of the Gujarat government. Subsequently Desai asked him to name a broker because he wished to sell the material. Therefore he suggested Dhiren Shah’s name to him. He did not deal with the goods in any of the manner specified in Clause (d) of Section 112 of the Act. He was not even clear whether to what extent the export obligation had or had not been fulfilled in respect of these goods. Rajesh Desai was not also been buying and selling considerable quantities of duty paid plastic materials from the appellants.
10. He contends on behalf of Dhiren Shah he had no knowledge with the goods were cleared without payment of duty and hence not permitted to be sold. This was the stand he had taken in his statement. No material has been advanced by the department to show that this was not the case.
11. It is also contended on behalf of all three appellants that Rajesh Desai was not made available for cross examination and therefore his statement cannot be relied upon. Mansukh Desai had died early in the course of adjudication. He cites the decision of the Tribunal in R.P. Hussain v. CC 1990 (49) ELT 412 to say that merely introducing a person to a broker for sale of smuggled goods does not attract penalty under Section 112 and another decision of the Tribunal in Aboobakar v. Collector 1994 (74) ELT 334 in which it has been held that knowledge that goods are smuggled or by itself does not attract penalty under Section 112 of the Act.
12. The department representative emphasises the finding recorded by the Commissioner in paragraph 38 B(iii) of his order. Sauren Shah the General Manager of Adani Exports had stated that he knew that the goods were imported under the DEEC scheme in a actual user condition and also confirmed that the goods wee sold in the market. Dhiren Shah broker had admitted that he sold goods at the behest of Gautam Adani and Sauren Shah. Vasudevan, the custom house agent had stated that the document for clearance were given by Adani Exports and Rajesh Adani used to give instruction regarding the clearance of the goods. Vinubhai Patel, an employee of Gujarat State Export corporation had stated that the liability on account of these transactions was to be borne by Adani Exports and Adani Associates and the parties for sale were brought by these two firms. Mansukh Desai/Rajesh Desai in their statement stated that goods were sold by Adani group of firm and Sauren Shah.
13. There are two sets of transaction involving in Adani Exports and Adani Associates follows in the second set of circumstances. The first relates to statement of orders by the two companies from the foreign supplier and arranging payment for the plastic material and thereafter arranging to sell these goods on the high seas. Here, Mr. Nankani has pointed out that the Commissioner has dropped proceedings against the Gujarat State Export Corporation and Gujarat State Finance Corporation. That being so, the role of Adani Exports and Adani Associates and of Gautam Adani and Sauren Shah with regard to these activities cannot be said to be such as to invite penalty. If there were any contravention of law in regard to these activities, the two corporations which entered into the transaction for export would be equally liable. The Commissioner says in paragraph 38(b)(iii) of his order that it was Adani Exports that rendered services such as opening letter of credit to Gujarat Small Industries Corporation (GSIC) and in terms of the agreement between Adani Associates and GSIC it is the former which is responsible for clearance of the consignment producing marketing of imported goods and all liabilities whatsoever. His conclusion that this clearly establishes involvement of Adani Exports and Adani Associates in the import and post import clearance of goods in violation of law does not follow. The fact that before the import of the goods was completed they were sold on high seas on GSIC or GESC to the group of companies of Mansukh Desai/Chaganlal and Sons. It is one of these group of company that filed the bill of entry for the clearance and who has been treated by the Commissioner has the importer, since he demands duty under Section 28 from them. Therefore up to the stage of import and clearance of the goods, nothing has been established against the appellants before us. In fact the Commissioner himself says the goods were cleared duty free by the four firms (of Mansukhlal Desai) for use and manufacture of export products, and firms in spite of doing so these firms sold the goods in the open market.
14. Let us now consider the post clearance situation. The allegation in the notice and the finding of the Commissioner is that the four firms sold these goods in the open market through Dhiren Shah, the broker. This is what the Commissioner says in paragraph 40(a)(iii) allegation with regard to Adani Import is to abet. Sauren Shah in his statement of 7.11.97 has accepted that he introduced Rajesh Desai to Dhiren Shah. He says “Mr. Rajesh Desai visited out Ahmedabad office and met our Chairman, Gautam Adani. Subsequently, I was directed by my Chairman to extend all the assistance that was required by Rajesh Desai. Rajesh Desai informed me that he intends to purchase PP/LDPE/HDFC/PVC on high seas basis and subsequently cleared the goods from the customs under various Advance L/C issued under DEEC scheme in the name of four firms. When I enquired him regarding the payment towards the high sea sale, Sri Rajesh Desai informed me that he would be able to pay only after selling the goods after the advance. He assured me that he simultaneously intends to complete export obligation as he was facing financial crisis. He proposed to sell goods and has informed me that this matter was discussed with the Chairman Gautam Adani. Since it is general in the market to exist on all clearance on high sea to have control on goods only when the payment is received. He readily agreed to provide assistance of customs clearance and have given this object to M.s ACD Shipping for a regular clearing agents. However, payments to the clearing agents were made by M/s. Chaganlal group of Companies. The clearing agents used to take instructors from us for clearance of goods and payments due to them are connected by us to Rajesh Desai to in turn sent the appellant to M/s. ACT Shipping. Rajesh Desai also requested some assistance regarding the sale and after customs clearance. We have introduced the Dhiren Shah broker as he was a regular broker of us for plastic raw material imported by us.” Gautam Adani himself when questioned, had said he was not aware of day today affairs relating to this and that when he was told about it he had verified the position from Sauren Shah. He has thus disowned any personal liability. The Commissioner told that Gautam Adani has admitted in his statement of 6.11.1997 about the sale of the duty free material. There is no such admission in this, or any other statement of his. He has apart from his having asked Sauren Shah held Rajesh Desai other evidence against Gautam Adani is substantial. He does not cite any specific evidence against Gautam Adani, other than the statement of Rajesh Desai. This person did not appear for cross examination despite being summoned. His statement thus cannot be relied upon (Arsh Castings v. CCE 1997 (81) ELT 287. The Commissioner goes on to find Gautam Adani and Company role to penalty in view of the agreement that the importing company. We have already dealt with this aspect. The Commissioner finds no liability to Gautam Adani to penalty wit regard to the sale of the goods. Penalty therefore could not be imposed on Gautam Adani or its company.
15. The Commissioner finds that Sauren Shah act of introduction Rajesh Desai to Dhiren Shah does not liable to penalty because he had admitted knowledge of illegal sale of goods. As we have noted, Sauren Shah says that he was told by Rajesh Desai that export obligation would be simultaneously fulfilled. There is no allegation that he stood to gain anything by this or he was acting in any manner for following the instruction of his superior. That is what he has said in his statement. Further, in the light of the statement that he believed that export obligation was being fulfilled the benefit of the doubt will have to go to him. It is also difficult to conclude that by this act of introduction of Dhiren Shah to Desai, he was dealing with the goods in any of the manner specified in Clause (b) of Section of the Act. The two decisions of the Tribunal cited by his advocate, are in his favour. On balance, therefore, we do not find any case for imposition of penalty on him.
16. While the Commissioner emphasises the fact that Dhiren Shah did nt insist on valid document for the goods which he sold and on cash terms and he was acting on instruction of Gautam Adani and Sauren Shah. Dhiren Shah was a broker in goods. No doubt he did not insist on illegal document. But by that itself cannot lead to the conclusion that he was aware of the illegal nature and contrary to customs law. Nor is ti correct to say that he was acting on instruction of Gautam Adani and Sauren Shah. As we have noted, Sauren Shah merely introduced Rajesh Desai to him and no further role is attributed to him in the order. Dhiren Shah in his statement on 18.11.97 says that he was asked by Gautam Adani to contact Sauren Shah and take instructions and in his further statement thereafter the sale of the goods he would send the proceeds either to Rajesh Desai and sometimes to Adani Exports. He also said that he sold material other than that imported by Chaganlal & Co. also. There is not a word in his statement as to his possessing knowledge that the goods were not permitted to be sold. The mere fact of the goods having been sold does not justify the conclusion that he was aware.
17. The appeals are accordingly allowed and the impugned order imposing penalties on the appellants set aside.
