ORDER
S.L. Peeran, Member (J)
1. By this misc. application, the appellant is seeking for modification of the Stay Order No. C/51/93-B2, dt. 10-9-1993.
2. By this stay order, the applicant had been directed to deposit a sum of Rs. 10 lakhs within a period of three months from the date of the order and bank guarantee of Rs.15 lakhs.
3. By this misc. application, the applicant has attempted to explain the reason for his not filing a counter-affidavit to the affidavit which had been filed by the Collector of Customs, Bombay with regard to his financial position. He has submitted that Shri Subhash Gupta was In-charge of the affairs of the company and he was not instrumental nor did he have the knowledge of the various violations committed by AWRL. He had also rebutted the statement of Shri Kumud J. Dharia. He has stated that he is not in a position to pre-deposit the huge penalty of Rs. 25 lakhs and in the circumstances, he prays for recall of the said order. The applicant has also filed a detailed affidavit as a rebuttal to the affidavit filed by the Collector. He has denied about his involvement in a bank fraud to the tune of Rs. 4.14 crores through M/s. Asian Wire Ropes Ltd. as alleged by the Collector in his affidavit. He also states that the proceedings have been stayed by Hon’ble Andhra Pradesh High Court. He has denied that invested part of his wealth in the name of his brother, Shri Thimmayya and established a poultry farm at Sholapur in Maharashtra. He has also denied that he has got any connection with the said poultry farm. He has stated that the farm belongs to Shri G. Ankamma and Shri G. Venkata Rao who have been advanced loan by Indian Bank. He has stated that he has got only three brothers and not five as alleged by the Collector. He has denied about jointly owned land 400 acres at Udaigiri in Nellore District of Andhra Pradesh. He has also denied about purchasing land measuring 120 acres from Shri Sundara Ramayya, Civil Contractor. He has stated that 69 acres of land were purchased by the appellant’s brother Sri M. Thimmayya from Sri Sundara Rammayya and that has nothing to do with the said transactions. He has stated that the said land was purchased by his brother out of the funds of Dr. M. Chandra Mouli. He has denied that any part of the sale proceeds of the goods sold by M/s. AWRL and no part of the money was received from Sri Kumud Dharia. He has denied that he has made a personal wealth of Rs. 1.5 crores illegally. He has also denied having invested any money in the name of his close family members.
3.1 Ld. Collector has filed a counter and parawise comments of 9 pages. The Collector has brought out various circumstances by which a conclusion can be drawn that the appellant is owning property and funds.
3.2 We have heard ld. Advocate, Sri Murlidhar for the appellant and Shri B.K. Singh, ld. SDR for the Revenue. Ld. Advocate mainly relied on the affidavit of the appellant. He has also stated that the appellant was a former Minister and he was so poor that he could not even pay Income Tax as a Minister, as Managing Director of the appellant’s company and even now as an MLA. He has stated that the Collector has placed only circumstantial evidence and there is no evidence including documentary evidence to link the appellant that the properties mentioned by the Collector in the affidavit.
4. Ld. SDR pointed out that Shri Thimmayya, the appellant’s brother was a school teacher and only after his association with the appellant, he grew rich and all properties came in his name. Ld. SDR also pointed out that there was no division in the family of the appellant and that it was a Hindu joint family and therefore the properties belong to the appellant, his family and brothers who comprise Hindu joint family. The properties are deemed to be Bimani and belong to the joint family properties. He has also pointed out on the records about the receipt of money by the appellant from Shri Kumud J. Dharia and T.N. Prahlad Accounts Officer of M/s. AWRL.
5. We have carefully considered the pleas made by both the sides and also gone through the records, counter-affidavits and counter reply of the Collector. In this case as noted in the stay order, the appellant does not have a strong prima facie case in his favour. The appellant was a former Minister and also the Managing Director of M/s. AWRL. The appellant wants us to believe that as a Minister, ex-Managing Director and as an MLA, he is a poor man and never earned money to pay as Income Tax. This is a very hard statement to believe that Managing Director was earning more than Rs. 2500/- per month. He was certainly within the tax limit. There is no emphatic denial that his family is not a Hindu joint family and there is a partition in the family. It is on record that his brother was merely a school teacher and the properties have come into existence only after his association of the appellant. Therefore, the property being of Hindu joint family, property cannot be ruled out. The appellant had merely stated that the property owned by his brother was his property. It is also the case of the Collector that the property is in the name of the appellant’s brother but what is being shown through all the circumstantial evidence is that these properties have come into existence only through the appellant. The appellant has not come to the court with clean hands and he is not willing to tell the truth. The fact that they are having rich property owned by brother and sister who were at one time, nobody clearly indicates that there has been patronage from the appellant. Therefore, it cannot be said that the appellant is a poor MLA and the former Minister without any means to deposit the amount. However, taking all the facts and circumstances of the case and in the interest of justice, we modify the order in the following manner :
The appellant shall deposit a sum of Rs. 5 lakhs in cash within 8 weeks from the receipt of this order and for the balance in respect of bank guarantee, instead he shall produce two sureties who should secure immovable property to the Collector’s satisfaction, free from encumbrance. The appellant should produce two surities with their immovable properties within eight weeks. On compliance of this order, the matter could be taken up for out of turn hearing as directed in the stay order. We take note of the order of Madras High Court rendered in the case of Collector of Central Excise v. Coronation Litho Works as reported in 1994 (69) E.L.T. 238 wherein the Madras High Court, while modifying the Tribunal’s stay order, had directed the respondent to furnish security which may be of immovable property free from encumbrance with marketable title. As the appellant has stated that he does not have his own property we have directed him to produce two sureties who shall give surety of immovable properties to the amounts stated by us. In the result, the misc. application is allowed to the extent stated herein and the Stay Order No. C/51/93-B2, dt. 10-9-1993 stands modified accordingly.
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(S.L. Peeran)
Dated : 22-4-1994 Member (J)
6. [Order per: P.C. Jain, Member (T)]. – I have carefully gone through the order proposed by my learned brother, Shri S.L. Peeran modifying the Stay Order No. C/51/93-B2, dated 10-9-1993. By the earlier order dated 10-9-1993, the applicant had been directed to deposit a sum of Rs. 10 lakhs within a period of three months from the date of the order and was also directed to furnish a bank guarantee for Rs. 15 lakhs. It has now been modified by the proposed order directing the applicant to deposit Rs. 5 lakhs in cash and for the balance in respect of bank guarantee the applicant has been directed to produce two surities who should secure immovable property to the Collector’s satisfaction free from encumbrance.
7. I have also carefully perused the earlier order dated 10-9-1993 passed by the Tribunal. That order is essentially based on the affidavit of the Collector of Customs dt. 4-8-1993 filed by the Revenue through an application dt. 13-8-1993. The applicant’s learned Advocate on 10-9-1993 had requested for further time to file a counter-affidavit to rebut the facts given in the Collector’s affidavit dt. 4-8-1993. The request of the learned advocate was, however, not acceded to on the ground that it had been made clear on an earlier date that the applicant should file counter-affidavit, if any, before 10-9-1993. Hence the request for adjournment was turned down. I also notice that thereafter, Shri Madhav Rao was asked to proceed with the arguments in support of the stay application. Shri Madhav Rao refused to make the arguments and he again sought time to file the affidavit. In the circumstances, learned SDR was asked to address his arguments on the stay application filed by the applicant.
7.1 From aforesaid sequence of events it is, therefore, evident that Stay Order No. C/51/93-B2 is essentially an ex parte order without any rebuttal counter-affidavit of the applicant being on record to the allegations levelled by the Collector in his affidavit dated 4-8-1993. This rebuttal counter-affidavit has now been filed along with the misc. application under consideration. The affidavit is dated 4th November, 1993.
8. Learned SDR, Shri B.K. Singh has placed on record parawise comments on the affidavit dated 4-11-1993 now filed by the applicant as received by him from the Collector.
9. I have gone through the affidavit dated 4-8-1993 of the Collector of Customs, Bombay, rebuttal of evidence of the applicant dated 4-11-1993 and the parawise comments of the Collector. It is to be noticed that the affidavit of the Collector regarding the financial soundness of the applicant/appellant bases itself on the intellegence gathered by DRI, Bombay. There are ten allegations made in para 4 of the said affidavit at S. Nos. (i) to (x) which, according to the Collector, point to the financial soundness of the applicant and therefore, it has been prayed that no leniency should be shown to the applicant for waiving the pre-deposit of the amount of penalty imposed on him.
9.1 The applicant in his affidavit dated 4th Nov., 1993 has rebutted those allegations on the basis of various documents. He has submitted that no land or property is in his name and to this effect he has produced a copy of the Report of Mandal Revenue Officer, Seetharamapuram that the applicant and his close relatives are not having any property in Seetharamapuram Mandal. This Report has been submitted by the Mandal Revenue Officer to the Assistant Collector of Central Excise and a photo copy of the said Report has been annexed as Annexure ‘V. Another allegation made in the affidavit of the Collector of Customs was that Shri Thimmayya, brother of the applicant has purchased 69 acres of land in his name. This has also been in my view effectively rebutted by the applicant as to how Mr. Thimmayya his brother had obtained money from his doctor son in America and how the entire land of 69 acres (instead of 120 acres as mentioned by the Collector) has been registered in three different names out of the money sent by the doctor son of the applicant’s Shri Thimmayya.
9.2 Similarly, the other allegations have been effectively rebutted by the applicant by proper documentary evidence. I have to observe that the allegations made by the Collector, as stated earlier, are on the basis of intelligence gathered by DRI, Bombay. An intelligence may be a basis for taking further investigation by way of search and raids or by any other method but an intelligence by itself cannot be treated as an evidence. An intelligence is in the realm of suspicion. It is well settled proposition of law that suspicion is no substitute for evidence. If we have to decide about the culpability of Shri Janki Ram, on the basis of intelligence that should not be done by us on account of the said proposition. Therefore, what cannot be made use of at the time of final decision of the appeal, it certainly cannot be made use of at the time of deciding the stay application. I am, therefore, of the view that the department has not been able to bring on record any satisfactory prima facie evidence regarding the financial soundness of the applicant so that he is in a position to deposit the entire amount of penalty or even part of it for the purposes of Section 129E of the Customs Act. The mere fact that the applicant had been the former Minister in the State of Andhra Pradesh or he had been the Managing Director in the firm which is one of the main appellants/applicants in this bunch of connected cases drawing Rs. 2500/- p.m. as a salary in AWRL, it cannot be said that by holding these two posts the applicant must be assumed to have good financial resources to raise the necessary funds for the purposes of pre-deposit of the penalty imposed on him in the impugned order.
10. An inference has been drawn on the basis of statements of the other co-accused in the cases that the applicant herein had made millions of rupees inasmuch as those allegations are yet to be gone into and the cases are yet to be decided. Those statements in my view cannot form the basis of determining the present financial condition of the applicant.
11. I also note, as rightly pointed out by the learned advocate, Shri S. Murlidhar for the applicants, that the stay applications of the other two appellants involved in this bunch of cases, merely, Shri Subhash Gupta and Shri Kumud J. Dharia have already been allowed without any pre-deposit being made. There is no reason why a similar treatment should not be accorded to the present applicant as well in the face of his averment in the stay petition duly supported by an affidavit that he does not possess any immovable property. He has neither filed wealth tax returns nor income-tax returns and in the absence of prima facie evidence to the contrary adduced by the department, as discussed above, I agree with this submission of the learned advocate. I am, therefore, inclined to modify the stay order dated 10-9-1993 and to allow the stay petition unconditionally.
12. However, having regard to the overall facts and circumstances of the case as also huge stakes of revenue involved in this bunch of appeals, I agree with my learned brother that this matter along with all the connected matters should be taken up for out of turn hearing. Date for out of turn hearing to be fixed in the open Court after taking into account the convenience of various parties and their counsels concerned. I order accordingly.
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(P.C. Jain)
Dated : 25-4-1994 Member (T)
POINT OF DIFFERENCE
Whether in the facts and cirumstances of the case the applicant should be directed to deposit a sum of Rs. 5 lakhs in cash and for the balance in respect of bank guarantee the applicant is to produce two sureties who would secure immovable property to the Collector's satisfaction free from encumbrance, as held by Judicial Member
OR
the applicant should not be directed to pre-deposit any amount in view of the poor financial condition of the applicant on the basis of evidence as brought on record, as held by the Technical Member.
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(P.C. Jain) (S.L. Peeran)
Dated: 26-4-1994 Member (T) Member (J)
K.S. Venkataramani, Member (T)
14. The learned Counsel Shri S. Murlidhar addressed arguments on the points of difference. He submitted that the appellant herein has filed an affidavit on 24-4-1992 that he has no immovable property and that he is not filing any income tax or wealth tax returns. The learned Counsel pointed out that the Collector’s affidavit contains an admission that documentary evidence regarding holding of property by the appellant is absent and yet the affidavit goes on to make vague assertion about amounts involved. The learned Counsel argued that the Department’s own enquiries with Mandal Revenue Officer had shown that the appellant was not holding any property. He has further submitted that a case against the appellants regarding alleged defrauding of Vijay Bank has been withdrawn by the CBI before the Karnataka High Court vide the High Court Order dated 6-12-1993 in Writ Petition No. 12287-89/93-G.M. The learned Counsel also contended that other appellants in the case of … who were also penalised by the Collector in the same impugned order, the Tribunal has dispensed with pre-deposit and granted stay. He referred to the order in the case of Kumud J. Dhria v. Collector of Customs, Bombay, reported in 1994 (72) E.L.T. 466 (Tribunal) and stay has also been granted in the case of Shri Subhash Gupta. The learned Counsel pleaded that it will be in the interest of justice to similarly grant stay in the case of the appellant also. The learned Counsel further pointed out that there is no evidence that the appellant’s brother is a teacher except in the Collector’s para wise comments. It is also nowhere in the case proceedings that the appellant is a Hindu joint family having joint family property as has been referred to in the order proposed by Member (Judicial). The learned Counsel pleaded for stay. Shri B.K. Singh, the learned Senior Departmental Representative supported the order proposed by Member (Judicial). The Department has a prima facie case in favour regarding clandestine disposal of imported material under the DEEC Scheme. The nature of such disposal in a clandestine manner by itself is such that it will not be possible to prove the offence by the Department with mathematical precision nor can it be accepted that the sale proceedings of clandestine sales will be reflected in their accounts. But there is evidence by way of a document seized from the residence of Subhash Gupta’s father which clearly shows the substantial amount being paid to the appellant as commission. The learned Senior Departmental Representative relied upon the Stay Order No. 15-17/94-A, dated 21-1-1994 – Maharashtra Tubes v. C.C. para-8 that no reliance can be placed on account books in such circumstances. The dominant criterion for stay is the prima facie case and the learned Senior Departmental Representative relied upon the Delhi High Court decision in the case of Uptron Powertronics v. Collector of Central Excise, Meerut, reported in 1987 (28) E.L.T. 61 (Delhi) that the appellant should first show prima facie substance in his claim and thereafter only can plead undue hardship. The Mandal Revenue Officer certificate only covers a particular area to stay that no property is held there by the appellant in his name in that village.
15. The submissions made by both the sides have been carefully considered. The records show that the Department’s own enquiry regarding holding of 400 acres land at Udayagiri has evoked a reply from the Mandal Revenue Officer, Udayagiri that the appellant is not holding any land in his name. This was in reply to the query for documentary evidence of property held by the appellant and his relatives. Another letter from the Mandal Revenue Officer, Seetharamapuram also says that the appellant and his close relatives are not having any property in that village. The other piece of evidence to show his financial situation is the private account seized from the father of Shri Subhash Gupta which would indicate that large amounts have been paid as commission to the appellant but in this context, it will be relevant to bear in mind that this piece of evidence was equally applicable to the other appellant Shri Subhash Gupta as an index of the financial position. However, in that case stay has already been granted. Another relevant factor to be noticed is that in the order of Hon’ble Member (Judicial) also it has been noted that the appellant has stated that he does not have his own property. As has been observed by the Member (Technical) in his order, the appellant has given plausible explanation of the acquisition of property by his brother and the resources at his command. In such a situation on an overall consideration of the circumstances in this case prima facie, it would appear that balance for convenience in this case will be to dispose of the stay application as proposed by the Hon’ble Member (Technical) whose order is, therefore, concurred with.
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(K.S. Venkataramani)
Dated : 7-9-1994 Member (T)
FINAL ORDER
16. In terms of the majority order, the pre-deposit of penalty amount is waived and recovery stayed till the disposal of the appeal.
17. The Registry to list the case before the Bench within two weeks from today with notice to the advocate for the appellant, for the purpose of fixing the date of final hearing as noted in para 12 page 9 of the order prepared by Member (T) Shri P.C. Jain.