ORDER
S. Kalyanam, Member
1. The above appeals arise out of the common impugned order of the Collector of Customs, Madras, dated 24.9.1991 under which he has levied a penalty of Rs. 5,00,000 on appellant M/s. Ambassador Garments, Rs. 1,00,000 each on appellants Thangarajah and Kumaraguru, and Rs. 50,000 each on the other appellants under Section 112(a) of the Customs Act, 1962, the ‘Act’ for short, besides absolute confiscation of 165 gold bars of foreign origin under Section 111(d), (i), (1) & (m) of the Act read with Section 67 of the Foreign Exchange Regulations Act, 1973.
2. On 28.5.1990, on the basis of information the Customs authorities seized a container which landed from ship M.V. Melita at the Madras harbour and found that the same contained fabrics and accessories imported from America. The consignment was to be cleared on behalf of appellant M/s. Ambassador Garments functioning at Madras Export Processing Zone, Madras-45. The authorities found gold bars of foreign origin kept concealed in 4 textile rolls and they effected seizure of the same under a mahazar as per law. During the course of investigation the authorities recorded statements of appellant Thangarajah, the General Manager of M/s. Ambassador Garments, and appellant Kumaraguru, working as Technician in that firm. Appellant Thangarajah in his statement dated 28.5.1990 stated that the progress of the company was not very satisfactory and, therefore, at the instance of Jaganathan Selvaraj gold was brought concealed in an earlier consignment and in respect of the present consignment he received a telephone call from Singapore from Jaganathan Selvaraj requesting him to keep certain fabric rolls separately. Appellant Kumaraguru gave a statement on 28.5.1990 that he was told by appellant Thangarajah that Jaganathan Selvaraj telephoned him that he would be coming for a marriage and that a particular carton should be kept separately till his arrival and the carton should not be opened and nothing should be removed from it and that he did not know what they would do with the gold bars or to whom they would be given. It is in these circumstances, after further investigation, the proceedings initiated culminated in the present impugned order appealed against.
3. Shri Habibullah Badsha, the learned senior counsel appearing for the appellants, submitted that so far as appellant Thangarajah is concerned, he is a paid employee viz. the General Manager, and so far as the seizure of the foreign gold in the present consignment is concerned, in his entire statement there is absolutely nothing to indicate that he knew that gold had been kept concealed in certain fabric rolls. The authority has chosen to impute knowledge to him only on the basis of his admission in the statement that he knew that on prior occasion gold had been brought. Knowledge in respect of smuggling of gold on prior occasion would not mean that Thangarajah should have had knowledge in regard to the present consignment also. It is further made clear in his statement that he does not get any benefit out of the same and even the telephonic conversation would merely direct him to segregate certain cartons and, therefore, he must be given the benefit of doubt.
4. So far as appellant Kumaraguru is concerned, the learned Counsel contended, he was not taking any salary and being a relative of the other partners was only working as a Technical Assistant and in his entire statement there is absolutely nothing to show that he was privy to any illegal transaction or had any knowledge that the gold under seizure was being brought concealed in the fabric rolls.
5. So far as the company is concerned, the learned Counsel contended, that admittedly the goods were seized from the container at the harbour itself even before the goods reached the garments factory. The company is a juristic person and is made technically liable. When contraband goods were seized even before they reached the premises of the company, the company cannot be made technically liable.
6. So far as the other appellants are concerned, the learned Counsel contended that there is absolutely not even a ray of evidence against them and they are penalised only on the ground that they are shareholders of the company. Merely because they are shareholders, whenever any offence is committed, knowledge cannot be imputed to them to levy any penalty particularly when the proceedings are penal in nature. In any event, the learned Counsel finally submitted that the penalty imposed is very huge and would warrant a very substantial reduction.
7. Shri Jayaseelan, the learned DR, contended that the goods were opened in the presence of the appellants’ clearing agents and package No. 11 had a specific marking and it had 26 rolls out of which 4 were heavy. He submitted that appellant Kumaraguru, Jaganathan Selvaraj and Jayaseelan had each 25% share in the company while the others had shares in the remainder 25%. Since contraband gold had been brought in the container, the shareholders must be held liable for penalty. The learned DR in other respects adopted the reasoning of the adjudicating authority.
8. We have carefully considered the submissions made before us. So far as appellants S. Ponnudurai, S. Jayaseelan, T. Selvaraj and K. Kandaswamy are concerned, there is absolutely no evidence either direct or circumstantial to even impute any knowledge to them that contraband gold was being brought in the fabric rolls. On going through the entire order, while not finding any evidence against them, we are inclined to think that no penalty could be levied on them because they happen to be shareholders in the company viz. M/s. Ambassador Garments. The proceedings being penal in nature, before levy of penalty on a charge of abetment under the Act there must be evidence either direct or circumstantial to connect the said persons with the commission of any offence and in the present case the penalty is levied on them only on the ground that they are shareholders in the company. Merely because a person is a shareholder in a company, if any offence is committed by the company, the shareholder cannot ipso facto be made liable penally. This position is quite obvious and well-settled. We, therefore, hold in the absence of any evidence the levy of penalty of Rs. 50,000 each on appellants K. Kandaswamy (C/123/92/MAS), S. Ponnudurai (C/126/92) S. Jayaseelan (C/127/92) and T. Selvaraj (C/128/92) is not sustainable on evidence available on record. We, therefore, set aside the levy of penalty on them and allow their appeals. We also in this context note that in the order disposing of the stay petitions on 5.5.1992 the Tribunal on prima facie consideration of the evidence against these appellants has observed as under:
So far as petitioners Selvaraj Jayaseelan, Selvaraj Ponnudurai, T. Selvaraj and Kandaswamy are concerned we do not find evidence prima facie on record connecting them with the commission of any offence in relation to the gold and the adjudicating authority would appear to have fastened them with penal consequences by reason of their being shareholders and closely related inter se. We, therefore, grant waiver of pre-deposit of penalty on them pending disposal of appeals.
9. So far as appellant Thangarajah is concerned, he is General Manager of the company and he has acted on behalf of the company and a perusal of his statement would bear out that he was privy to the commission of a similar offence earlier. No doubt, in the statement recorded from him so far as the present consignment is concerned there is no specific evidence that he knew that gold was being brought by concealment in the fabric rolls. But, however, the telephonic message he had from Jaganathan Selvaraj from Singapore and the knowledge on his part with reference to the earlier consignment of contraband gold and other circumstances would bear out that he knew that contraband gold was being sent in the cartons. Therefore, on the basis of the evidence available on record, we hold that the charge against him has been brought out.
10. So far as appellant Kumaraguru is concerned, even though he was acting only as a Technical Officer in the company without any salary, he was closely related to the other shareholders and was also holding substantial shares in the company. Even though his statement does not specifically indicate any knowledge on his part that gold was being brought in the fabric rolls, a reading of his statement, his relationship and ownership in the company, his role as a Technical Officer and his knowledge about the telephonic conversation received from Thangarajah and other circumstances would establish that he could not have been unaware of the fact that gold was sent from Singapore in the textile consignment. In this view of the matter we hold that the charge against him also has been brought home.
11. So far as the company is concerned, no doubt the company is made technically liable as a juristic person. We take note of the fact that the goods in question containing contraband gold were seized at the harbour itself before they moved to the factory. It is only the General Manager of the company who has acted on behalf of the company. Therefore, in the facts and circumstances of the case we hold the company is technically liable. We confirm the absolute confiscation of gold in terms of the impugned order and also note that the fact of seizure of the gold is not disputed by the appellants.
12. So far as appellant Thangarajah is concerned, he was only a paid employee, the General Manager of the company and the evidence does not indicate that he was a beneficiary in respect of the illegal transactions, yet even if he had acted at the behest of his employer, he will be guilty of the charge of abetment and having regard to the nature of the role played by him and his position as an employee, we hold that the ends of justice would be met if the penalty of Rs. 1,00,000 on him is reduced to Rs. 75,000 (Rs. Seventy five thousand) and order accordingly.
13. So far as Kumaraguru is concerned, taking note of the fact that his statement does not impute knowledge to him and he has not played any active role, we reduce the penalty on him to Rs. 10,000 (Rs. Ten thousand).
14. So far as the company is concerned, the company is made technically liable as a juristic persons. The goods did not reach company premises and were intercepted in the harbour itself. Keeping in mind the technical liability of the company in penal proceedings of this kind, we reduce the penalty on the company to Rs. 1,00,000 (Rs. One lakh).
15. The appeals stand disposed of in the above terms.