ORDER
T.P. Nambiar, Member (T)
1. These are ten appeals filed by the appellants against the orders passed by the Collector in Order No. 147/94, dated 19-4-1994. In terms of that order, he allowed the goods to be redeemed on payment of redemption fine totalling Rs. 10 lacs and imposed penalties on M/s. Eastern Silk Inds. (Rs. 10 lacs), Sri Shah, M.D. (Rs. 5 lacs) and Sri G.K. Lath (Rs. 5 lacs).
2. The facts of the case are that M/s. Sai Shipping Agencies, Madras Customs House Agents filed on behalf of exporters, M/s. Eastern Silk Inds. Ltd., Madras the following six shipping bills for export of polyester printed sarees (printed, printed and dyed), made-ups from man-made filament yarn and sarees of man-made filament yarn with zari border as detailed below :-
1. 6560/17-3-1994 Polyester printed sarees Rs. 10,05,293/- 8,847. 6kg.
(9,264 pcs)
2. 6561/17-3-1994 1. Polyester printed Rs. 6,13,293/- 6,437. 2kg.
sarees (5,313 pcs)
2. Polyester salwar suits
(252 pcs)
3. 6562/17-3-1994 Polyester printed & dyed Rs. 3,63,711/- 3,216. 1kg.
yarn (2,803 pcs)
4. 6563/17-3-1994 Polyester printed & dyed Rs. 5,85,606/- 3,216.1 kg.
saree (1,101 pcs)
5. 6564/17-3-1994 1. Man-made filament Rs. 7,60,631/- 5,003.6 kg.
yarn sarees with zari
border. (3,575 pcs)
2. Man-made filament
yarn sarees and
salwar suit (sets) (446
pcs)
3. Man-made filament yarn
shirts (240 pcs)
6. 6565/17-3-1994 Polyester printed & dyed Rs. 6,07,907/- 5,349. 8kg.
sarees (4,652 pcs.)
3. In each of the above Shipping Bills, the exporters subscribed to a declaration as to the truth of the contents of the Shipping Bill in terms of Section 50(2) of Customs Act, 1962.
4. The above shipments were sought to be effected under DEEC scheme against the following two Advance Licences :-
(1) Advance Licence No. P/W/3497784/8-3-1994 & DEEC Book No. 114246/8-3-1994.
(2) Advance Licence No. P/W/339289/23-12-1993 & DEEC Book No. 091701/23-12-1993.
Both the above licences are quantity based advance licences issued with Calcutta as the Port of Registration; both quantity and Value being limiting factors.
5. On scrutiny of the shipping bills by the dealing group, it was noticed that the weight of polyester saree per piece on average was declared at around 1 kg. each which appeared rather excessive considering the normal weight of such polyester sarees. A doubt was thus entertained by the group as to the correctness of the weight declared by the exporters/Advance Licence holders. Hence, the group endorsed in the open order for examination giving a specific direction for test weightment of the goods which mostly comprised of Polyester Sarees.
6. The examination of the goods done under second appraisement procedure on 18-3-1994 revealed that on test check, one consignment pertaining to shipping bill No. 6563, dated 17-3-1994 indicated an actual gross weight of 1,053 kgs. only in respect of a total number of 33 cartons entered against the said shipping bill vis-a-vis the total declared weight of 3,282.1 kgs. This indicated that the weight declared by the exporters was over-declared by 2229 kgs. as compared to the actual weight of 1,053 kgs.
7. A detailed examination in respect of all the shipping bills was therefore conducted 19-3-1994 which showed the following results :-
(i) The total number of pieces of sarees and other items found on examination was as per the declared quantity in terms of numbers.
(ii) The weight was grossly mis-declared inasmuch as the total ascertained gross-weight of all the packages under cover of the 6 shipping bills was found to be 11,476 kgs. as against the declared gross weight of 32,858.3 kgs. involving excess declaration of weight to the extent of 21,382.3 kgs.
8. The above examination results basically indicated mis-declaration as to the weight of the goods sought to be exported which, as already mentioned, essentially comprised of Polyester Sarees. The Advance Licences in question are quantity based and as per input and output norms of licensing policy provisions under DEEC Scheme for every kg. of sarees made out of polyester filament yarn exported, an Advance Licence holder is eligible for import of 1.18 kgs. of polyester filament yarn. As regards exports of fabrics and hosiery made from 100% man-made filament yarn, the import entitlement is 1.100 kgs. of filament yarn against 1 kg of export product. This clearly indicated a blatant attempt to account for export of larger quantity of goods in terms of weight than what was actually sought to be exported, with an obvious intention to obtain larger quantity of duty-free import entitlement of the said yarn.
9. A search of the office-cum-godown premises of the exporter at Kodambakkam, Madras was conducted on 22-3-1994. The search brought to light certain vital documents relating to exports in question. The documents thus seized during the course of search comprised of certain ledgers showing the purchase of sarees and other items made by the exporters locally from dealers in Surat, Varansi, Bombay, Bangalore and certain proforma invoices pertaining to the shipments in question wherein material amendments in red ink were made of the weight and value originally typed out. The altered values in red ink were seen to have been reflected in the invoices and the declarations made in the shipping bills filed before the Custom House. On scrutiny of the purchase values in the ledgers and the supporting vouchers also seized, it came to light that the values declared in the shipping bills and the supporting invoices filed were less than what was found in the purchase documents. These declared values were incidentally corroborated by the amendments in red ink made in connection with the preparation of the final documents like viz. shipping bills and the invoices which were filed with the Custom House.
10. A statement recorded on 23-3-1994 under Section 108 of Customs Act, 1962 from Shri Murari Prasad Jalan, a Supervisor at Madras office at Kodambakkam revealed that he made the original entries in the ledgers based on the purchase vouchers of sarees and other items obtained from various places; the subsequent manipulations of weight and value were done by one Shri Gopilath, a Bangalore based broker and Shri Pawanlath of Bombay. The final documents like the export invoices and packing list were thus prepared by Shri Gopilath and the packing of goods for export purposes was also done under the supervision of Shri Gopilath. Subsequent, to preparation of the documents as above, the documents were entrusted to the custody of Shri Ravi Kumar, Executive of Madras office. Shri Jalan thus admitted that the values as declared in the shipping bills were only manipulated ones and not the correct ones as originally prepared by him from purchase vouchers.
11. On 24-3-1994, a statement under Section 108 of the Customs Act, 1962 was recorded from Shri Shankarlal Sharma, Director-cum-Executive of the exporters company, wherein he stated, inter alia, that their company was engaged in export business of silk goods and around 1978 when the DEEC scheme came into vogue, exports of the same was also made under DEEC. Around December, 1993 the Managing Director of that company, Shri S.S. Shah (Shyam Sunder Shah) told him (Shri Sharma) that they were likely to diversify their export trade to Polyester sarees to Middle East buyers with the assistance of the two brothers Shri Gopilath and Shri Pawanlath, to whom a commission of 10% of the profit was to be paid for their service in indigenously procuring supplies of goods and effecting exports on behalf of the company. Shri S.S. Shah instructed Shri Sharma that all help was to be extended to them. The goods, viz., Polyester sarees were purchased/procured by them and sent to Madras Office, and payments were made directly to the suppliers in Surat, Varanasi, Bombay etc., Shri Sharma added that the shipments in question were being effected for the first time and that the export was sought to be made of Polyester goods against the two Advance Licence in question.
12. Shri S.S. Shah, Managing Director, in a statement recorded under Section 108 of Customs Act, 1962 on 29-3-1994 stated that their company was basically engaged in the manufacture and sale of silk fabrics and staple fabrics made of staple fibre yarn. The company diversified their line of exports to cotton fabrics and made-ups garments during 1965 to 1970. Most of their exports were to buyers in U.S.A., Germany and other European countries and Australia. They exported to the Middle East for the first time in 1974 and the export items Iron and Steel Products. As they were looking forward for the development of their market abroad in new avenues, Shri Gopilath introduced to them Kuwaiti buyers in December, 1993. Shri Gopilath and Shri Pawanlath were brothers and their father Shri Shyam Sunderlath was known to him since childhood. Shri Gopilath was employed as an Assistant in the Bombay office of M/s. Eastern Silk Industries, Bombay for 5 years and around 1978/1979 he was removed from the office as he was found incompetent. The contact was renewed with the introduction of Kuwaiti buyers in December, 1993 and it was decided and agreed upon that since the company was new to export of Polyester goods, Shri Gopilath and Shri Pawanlath would procure all the goods from places like Varanasi, Bombay, Surat, Bangalore etc., and would also pack and arrange for the physical export of the consignment. The buyers so arranged by Shri Gopilath were M/s. Lozan Trading Co., Kuwait and Nickil Sethna (introduced in February, 1994). After procurement and arrival of the polyester goods at Madras office, S/Shri Gopilath and Pawanlath reached Madras officer and as per their earlier understanding, they themselves prepared the invoice, packing list and other documents for the export of sarees. An instruction was given to Madras office to extend full co-operation to Shri Gopilath and Shri Pawanlath in the preparation of export documents, segregation and packing of sarees etc. and final despatch of the goods. Shri Gopilath and Shri Pawanlath engaged the services of clearing agents and Shri S.S. Shah was not aware of the name of the clearing agents for the consignment. The remuneration of Shri Gopilath and Shri Pawanlath for the above services had not yet been decided so far but it was however, agreed upon that a certain portion of net profit accruing from export and related import, made would be paid to them. Shri S.S. Shah learnt from Madras office that the goods under export to Kuwait were covered by 6 shipping bills and these bills were presented to Madras Custom House for assessment on 18-3-1994. Subsequently, on 20-3-1994. Shri S.S. Shah left for Bombay on his way to Dubai and ultimately to Kuwait, the visit having been planned to further their relationship with buyers. During his brief stay at Bombay on 20-3-1994, he met Shri Gopilath and Shri Pawanlath and they showed invoice and packing list which he took from them to be handed over to the buyers in Kuwait as an advance intimation. Finally, as Chief Executive of that company, Shri Shah undertook full responsibility for the details given in the shipping bills and in particular, he admitted that misdeclaration has been resorted to.
13. Shri Gopilath, in a statement recorded under Section 108 of the Customs Act, 1962 on 29-3-1994, stated inter alia that he knew the buyers M/s. Lozan Trading Co., and Nickil Bhai of Kuwait and approached Shri Shyam Sunder in November 1993/February 1994 for supply of fabrics and made-ups on commission, the quantum of which was not fixed. Accordingly, the purchases were made through his brother, Shri Pawanlath from places like Varanasi, Surat, Bombay, Bangalore etc. and as instructed by S. Sunder Shah, Shri Gopilath went to madras office and prepared packing list, invoice etc. for the 6 export consignments to be exported under DEEC scheme against the 2 Advance Licence in question. Shri Gopilath admitted that he had knowingly increased the weight of the consignment to suit the requirement of export obligation under DEEC scheme. Regarding prices, he stated that he simply followed the prices agreed upon by the buyer with M/s. Eastern Silk Industries, even though the materials had been procured at various prices as were shown by him from out of the seized documents. He further confirmed that the handwriting/corrections made in the same manner in regard to the preparation of invoices were his and the invoices were typed at the Madras office under his instructions and that increase in weight in the invoices were made to get profit. He further added that unless the weight of the export goods were increased on paper, they will not get good profit. Shri Gopilath also studied a working sheet prepared by the Deptt. showing actual weights and value vis-a-vis the declared ones and agreed to the contents of the working sheet. He also mentioned that the Custom House agent viz., M/s. Sai Shipping Services of Madras was arranged by himself and he did this on instruction from Shri Sharma of Calcutta office who asked him to arrange for a new Custom House Agent for shipping polyester goods consignment.
14. A representative sample of the goods under export was also drawn and tested by the Customs House lab. It appeared to the Deptt. that the consignments of polyester sarees, man-made filament yarn sarees and made-ups etc. were sought to be exported against two advanced licences, which were quantity based and the quantity of polyester items were misdeclared in terms of weight and description and which works out to 21.862 mts. This should have entitled the exporter the benefit of duty free import of polyester yarn of 25.797 mts. and to a total duty free benefit to the tune of Rs. 73,54,432. It was also found that there has been an-excess declaration of man-made filament yarn to the extent of 3.312 mts. which would have entitled a duty free benefit to the extent of Rs. 2,23,663. The value declared by the appellants in the shipping bills did not cover the purchase price of the goods under export. Accordingly, a SCN was issued as to why the goods are not to be confiscated under Section 113(1) read with Section 50(2) of the Customs Act, 1962 and Section 18(1)(a) of FERA, 1973 read with Section 67 and why penalty should not be imposed under Section 114(1) of the Act. Replies were filed and thereafter personal hearing was granted and the impugned order is passed.
15. The learned Sr. Counsel contended before us that Collector had adopted a wrong principle. He stated that there was no admission on the part of Shah with respect to the alleged mis-declaration and the quantity value. He has clearly stated that everything was done by Gopilath. The alleged omission and commission of Gopilath cannot bind the company. He further stated that the price declared under the shipping bills and GR 1 forms was the actual price and there could be no violation of Section 18(1)(a) of FERA. In this connection, he relied on the following decisions :-
(i) 1993 (65) E.L.T. 201
(ii) 1994 (69) E.L.T. 228
It was further contended that there is no evidence to show that Shah knew anything about the corrections and the alterations. There are no mala fides on the part of the company or its Managing Director and there is no mens rea in their part. If the mistake had been done without the knowledge of the company or the Managing Director, they cannot be penalised. He also pointed out that the confiscation of 10.196 mts. is without any basis and the goods are prohibited or restricted item and they are not allowed to be exported freely. It is also not the case of the deptt. that the appellants have imported any goods against the value based licence and the DEEC scheme. Hence, no loss is caused to the Govt. It was further pointed out that Section 18(1)(a) of FERA speaks about the export value of the goods which is the contracted price between the buyer and the supplier. However, the customs insisted on loading the value and since the goods had to be urgently exported, they accepted the same. This is not the value of the goods and hence, there is no misdeclaration. Merely because the goods are bought for a higher price it does not mean that this is the export value. He therefore stated that it was at the instance of the Customs they made the change in the price. He further pointed out that it is not the function of the adjudicating authority to see what is the quantity or nature of the goods which is exported. It is for the buyer to verify the same. It was further pointed out that the Collector felt the need that the advance licence so issued should be both quantity based and value based. It was further contended that the value of the goods does not confer any benefit on the exporter and if at all there is any error it is only a bona fide error. In any case, it was contended that neither the company nor the Managing Director has any role in this. There is also no deliberate attempt to export goods after manipulation of the shipping bill. This report obtained is behind the back of the appellant and no opportunity was given to contest the same. He therefore prayed that the appeal may be allowed.
16. The learned DR on the other hand contended before us that the statements of Shah and others goes to show that the mis-declaration was done with the knowledge of Shah. He pointed out that the charges of mis-declaration with reference to the weight and description is clearly established on the facts of this case and in terms of the statements recorded by the deptt. from several persons. The main charge in this case relates to excess declaration as well as mid-declaration against the goods sought to be exported against quantity based advance licence which would have entitled the appellant the duty free import to the extent of Rs. 80 lacs. He also relied on the reasonings in the impugned order and stated that the same is in accordance with law and prayed for dismissal of the appeals.
17. We have considered the submissions made by both sides. The first point for determination is whether there is any mis-declaration with respect to the quantity and the quality of the goods in question. It is now seen that the deptt. has issued the SCN in this behalf and the appellants have not traversed the allegations in the SCN by filing any reply. It was only during the hearing before the adjudicating authority they have raised certain points and hence the question of violation of principles of natural justice does not arise in this case. In para 3 of the order, the learned adjudicating authority has clearly stated that the only plea raised during the hearing as well as in the statement recorded at the time of investigation is for taking a lenient view. It is now seen that Sri Gopilath had given a statement on 29-3-1994 wherein he stated that he knew the buyers M/s. Lozan Trading Co. and Nickil Bhai of Kuwait. He accordingly approached Shri Shyam Sunder for supply of fabrics. The purchased were made through his brother Shri Pawanlath. He had also admitted that he knowingly increased the weight of the consignment to suit the requirement of export obligation under the DEEC scheme. Regarding price, he stated that he simply followed the price agreed upon by the buyer with .Eastern Silk Inds., even though the materials had been procured at various prices as were shown by him from out of the seized documents. He has further confirmed that the handwriting corrections made in the same manner in regard to preparation of invoices were in his hands and the invoices were typed at the Madras office under his instructions and that increase in weight in the invoices were made to get profit. He has also stated that unless the weight of the export goods were increased on paper, they will not get good profit. He has also seen the worksheet prepared by the deptt. showing actual weights and the value vis-a-vis the declared ones and agreed to the contents of the working sheet of the deptt. Therefore, it is clear from the admission made by themselves that there was mis-declaration in value as well as weight of the goods and he had made the corrections.
18. The decision relied on by the learned Counsel reported in 1993 (65) E.L.T. 201 is not applicable to the facts of this case. In that case, their Lordship’s were concerned with mis-description of the goods and it was not shown how the goods are liable for confiscation because of the description. In this case, it is seen that there is a mis-declaration of the weight and value as well as mis-description of the goods itself which would have entitled the exporter for a higher duty free benefit.
19. It is further seen from the statements of Shri S.S. Shah, Managing Director, that Shri Gopilath introduced the Kuwait buyers and arranged procurement of goods to be exported. It is thus seen that he has admitted about the mis-description of the goods as well as their weight and value. Therefore, when the goods were being attempted to be exported contrary to the prohibition i.e. contrary to the guidelines and without the correct description they are liable for confiscation under Section 113(d) of the Customs Act read with Section 18 FERA. The term “prohibited goods” is defined in clause (33) of Section 2 of the Customs Act. The export is subject to the condition that the correct description and weight should be mentioned. Since there was mis-description of goods, the goods are liable for confiscation. It is further seen that Shri Shah, the Managing Director of ESI has stated that as Chief Executive of ESI he undertook full responsibility for the details given in the shipping bills and that mis-declaration has been resorted to. In that view of the matter, confiscation of the goods and allowing the same to be redeemed on payment of redemption fine is proper and in accordance with law. As far as the quantum of redemption fine is concerned, it is seen that for Shipping Bill Nos. 6560,6561 & 6564, the redemption fine imposed is Rs. 2.00 lacs each. In the circumstances, we reduce the same to Rs. 1.50 lacs (Rupees one lac fifty thousand) in each Shipping Bill (total 4.5 lacs). As far as Shipping Bill No. 6562 is concerned, the redemption fine imposed is Rs. 1.00 lac and in the facts and circumstances, we reduce the same to Rs. 75,000 (Rupees seventy five thousand). As far as the shipping bill Nos. 6563 & 6565 are concerned, the redemption fine imposed is Rs. 1.50 lacs each which in the facts and circumstances of the case are reduced to Rs. 1.25 lacs (Rupees one lac twenty-five thousand) in each Shipping Bill and thus a total of Rs. 2.5 lacs. But for the above reductions, the confiscation and allowing the same to be redeemed on payment of redemption fine is confirmed. Thus the total redemption of Rs. 10 lacs imposed on these (sic) consignments, in the impugned order is reduced to Rs. 7.75 lacs i.e. Rupees seven lacs and seventy-five thousand only.
20. The next point for determination is whether the penalty of Rs. 10 lacs imposed on ESI is sustainable. It is now seen that the goods were exported on behalf of ESI. On behalf of ESI, Shri Gopilath was authorised by Shri Shah to do the work. Shri Shah as an Executive of that company undertook the full responsibility for the details given in the Shipping bills. Shri Gopilath had clearly admitted that he has prepared the invoices at Madras and he increased the weight to get profit. He also admitted with reference to the department’s work-sheet that there was mis-declaration. Therefore, the imposition of penalty on the company as well as on Shri Gopilath is justified. The penalty of Rs. 5 lacs imposed on Shri Gopilath cannot be stated to be in any way excessive. Since the company itself is bound by the acts of Shri Gopilath and since it is admitted that Shri Gopilath was authorised to do all the acts, by Shri Shah, the Managing Director the Company is also liable to penalty. In our view, penalty on the company is on the higher side. Accordingly, the penalty of Rs. 10 lacs imposed on the company is reduced to Rs. 5 lacs (Rupees five lacs), in view of the fact that Gopilath who had done the manipulations for his personal benefit was penalised to the extent of Rs. 5 lacs only.
21. The next question for determination is whether Shri Shah is liable for any penalty. In this connection, the learned adjudicating authority in para 4 of the impugned order has held as follows :-
“As regards Shri S. Shah, M.D. of M/s. ESI, he has admitted in his statement dated 29-3-1994 that he knows the father of Shri Gopilath for a long time; Shri Gopilath was their employee in Bombay office for five years; that after dismissing him for incompetence in 1978-79, had re-established the contact for the instant export; and that Shri Gopilath and Shri Pawanlath had showed the invoice and packing list for handing over to buyers in Kuwait. It was also admitted that Madras office was directed to extend full cooperation to S/Shri Gopilath and Pawanlath in the preparation of export documents, segregation and packing of sarees etc., and final despatch of the goods. It is also confirmed by Shri Shankarlal Sharma, Director-cum-Executive of the company and by Shri Gopilath in their respective statements dated 24-3-1994 and 29-3-1994 that Shri Shah had instructed Shri Gopilath to go to Madras office for preparing packing list, invoice, etc., and that he had also instructed Madras office to extend all help required by Shri Gopilath. These clearly indicate his (Shri Shah’s) role, apart from the responsibility owned-up by himself i.e. by Shri Shah in his statement dated 29-3-1994 that as Chief Executives of M/s. ESI to the attempted export with excess declaration under DEEC scheme to avail benefit of duty-free import of material involving duty of nearly Rs. 80 lacs. Accordingly, he has also rendered himself liable to penalty under Section 114(1) of Customs Act, 1962.”
It is now seen that Sri Gopilath in his statement has not implicated Shri Shah in any way. On the contrary, in his statement he has stated that he had made the corrections. But, nowhere he has stated that he made these corrections as well as the manipulations at the instance of Shri Shah and that Shri Shah has instructed him to prepare the invoices on other documents. There is nothing in the evidence to show that he has instructed Shri Gopilath to misdeclare the goods both in value or in weight. No doubt he admitted that he undertook the full responsibility for the details given in the shipping bills. Since the company is already penalised and when there are no materials to show that all the mis-declarations were done at his instructions and when Shri Gopilath himself who has carried out these manipulations has not implicated him, and in the facts and circumstances, there is no warrant to impose any personal penalty on Shah. Besides, penalty has already been imposed on the firm. Since Shri Shah who is the Managing Director of the above firm is not shown to have taken any direct act in the manipulations and in the absence of any such evidence in this regard, a mere statement by him that he takes full responsibility for the incorrect entries by itself is not sufficient to hold that he is liable for personal penalty in the absence of mala fides on his part in this regard. Therefore, we set aside the imposition of penalty of Rs. 5 lacs on him. The appeals are thus disposed of in the above terms.