ORDER
Jyoti Balasundaram, Member (J)
1. Brief stated the facts of the case are as follows :
On specific information the Directorate of Revenue Intelligence raided the premises of M/s. Panam Maintenance Office and Panam Cargo Office at Indira Gandhi International Airport, New Delhi on 20-8-1987 and recovered incriminating documents such as original shipping orders/invoices alongwith fabricated invoices showing lesser value and also other relevant documents such as Bills of Entry. The business premises of M/s. Airport Handling Services, clearing agents for Panam were also searched which resulted into the recovery of incriminating documents. Subsequently, the statements were recorded from Shri Ashok Kumar Sehgal, Manager, Panam (Cargo) IGI Airport, Mr. B. Wiessmenn, Director (India) Panam Airways, Mr. S. Ranganathan, Proprietor of M/s. Airport Handling Services and Mr. Ramesh Chander, Employee of the Clearing Agents. In their statements, they admitted their knowledge and collusion in wilful mis-statement and suppression of facts and undervaluation and evasion of Customs duty during the period from 1982 onwards by producing fabricated invoices shipping orders showing the value of the imported goods much less than the value indicated on the original documents. On the basis of the seized documents, a chart showing the shipping orders numbers, value shown in the original shipping orders, value shown in the fabricated invoices, duty actually leviable, duty actually paid and amount of duty evaded was prepared by the Department and checked by Panam representatives deputed by Mr. Wiessmenn, B. and verified to be correct, and the total duty evaded by M/s. Panam Airways during the said period from 1982 to 1987 worked out of Rs. 29,61,527/-. M/s. Panam Airways paid the said amount on 9-9-1987 without prejudice to its rights. On 20th Oct. 1987, a show cause notice was issued to the above appellants and also to Shri Hem-rajani, Manager Passenger Marketing, M/s. Panam and Mr. R.D. Tiwari, Supply Officer, Panam alleging that Panam Cargo had evaded Customs duty by filing fabricated invoices during the period 1982-87 and by reason of the said undervaluation, the goods were liable for confiscation under Section 111(m) of the Customs Act, 1962 and the persons concerned to personal penalty under Section 112 thereof. The show cause notice also proposed adjustment of the amount of Rs. 29,61,527 already deposited towards duty allegedly evaded by M/s. Panam under Section 28 of the Customs Act. In the reply to the show cause notice, the plea taken was that the invoices referred to in the show cause notice were in fact not invoices but shipping orders which are internal documents of the first appellant company and the prices mentioned therein were notional amounts debited by the appellant company to the centres in India for the purpose of budgetary allotment which are made annually. The items imported such as promotional material, air-line tickets, stationery items and other misc. equipment for the appellants’ actual use, were received from various Panam locations mostly in the United States of America but also occasionally from London, Frankfurt, Hongkong and other centres. This system was prevalent for a very long time and every time goods were imported a bill of entry was filed and assessed and goods were duly cleared for home consumption on the basis of the value indicated thereon. The first appellant also urged that the valuation of the article is to be determined under Section 14(b) of the Customs Act read with the Customs Valuation Rules, 1963 and the only rule applicable is Rule 8, providing for best judgment valuation. All the appellants submitted that they were not liable to penal action.
2. The adjudicating authority passed the impugned order adjusting the amount of Rs. 29,61,5271- already deposited against the Customs duty evaded by Panam during 1982 and 1987, on the basis of the admission of evasion of duty. He also imposed following penalties under Section 112(a)(iii) as shown below:
__________________________________________________________________________________________ Name Amount of penalty 1. M/s. Panam (Cargo) World Airways Rs. 75,00,000/- (Rs. seventy five lakhs only) 2. Mr. Wiessmenn, B. Director (India) Rs. 5,50,000/- (Rs. five lakhs fifty PANAM Airways thousand only). 3. Mr. Ashok Kumar Sehgal, Manager Rs. 5,00,000/- (Rs. five lakhs only). (Cargo) PANAM IGI Airport. 4. Mr. R.D. Tiwari, Supply Officer, Rs. 2,00,000 (Rupees two lakhs only). PANAM 5. M/s. Airport Handling Services Rs. 7,00,000/- (Rs. seven lakhs only). 6. Mr. S. Ranganathan, Managing Rs. 2,00,000/- (Rs. two lakhs only). Partner, M/S. Airport Handling Services (CHA). 7. Mr. Ramesh Chander, Employee Rs. 5,000/- (Rs. five thousand only). M/s. Airport Handling Services __________________________________________________________________________________________ Hence these appeals. 3. We have heard Shri V. Lakshmi Kumaran, Id. Counsel for appellant Nos. 1, 2 & 3 and Shri N. Ramanathan, Id. Consultant for appellant Nos.4, 5 & 6.
4. Shri V. Lakshmi Kumaran submits that the shipping orders which have been taken as the basis for valuation of the imported goods are merely lists of articles supplied to Panam in India by its locations and the prices mentioned in the said inventory are not the prices at which Panam imported these goods into India. The shipping orders are internal documents of the company and the prices mentioned therein are only notional amounts debited by the parent company to the centres in India for the purpose of budgetary allotment. Since the goods imported did not have any ascertainable price, the price in accordance with the best judgment’ of the concerned Panam officer was accepted by the Customs authorities. The value indicated was proper and there was no undervaluation of any kind. The Id. Counsel submits that there is no justification for imposition of penalty on the appellants and in any event the penalties imposed are very excessive and disproportionate to the value of the goods and to the extent of alleged evasion of duty.
5. We find that the evasion of duty has been admitted by the second appellant himself in his statements which are reproduced below :
“Statement of Mr. Wiessmenn B., Director India Panam Airways, Chanderlok, 36, Janpath, New Delhi, R/o 3/31, Shanti Niketan, New Delhi.
I have appeared before you today the 2nd September, 87 in pursuance of your summons DRI. F. No. 34/XI/9/87-Inv. dt. 1st Sept ’87 issued under Section 108 of the Customs Act, 1962. I have been explained the provisions of Section 108 of the Customs Act, 1962.1 have been made aware that I have to make a true statement and if anything is found false legal action can be taken against me and that this statement can be used against anybody in any court of law. My true statement is as under :
I was appointed as Director (India) of Panam Airways from 1st Oct ’85, but I have been permanently residing in India since January, 1986. Regarding the expenses which we have to incur in India for maintenance, staff salaries, payment of customs duty on company cargo, etc. I have to state that whatever revenue we earn in India in the form of sale of tickets or cargo freight, out of that revenue all the expenses incurred for maintenance, staff salaries, customs duty, local advertisements and other expenses incurred in India e.g. Airport landing charges are deducted from the total revenue earned and the balance amount is remitted to our New York Office with the permission of Reserve Bank of India. This accounting is done on monthly basis.
We import company material/cargo for use in India and get the same cleared through Customs after filing the documents with Customs authorities. I have been shown today the following shipping orders containing the original S/O Nos. and also the Pan American World Airways Inc. Invoices bearing the same typed S/O Nos. but containing different value. In some of the typed invoices the value has been shown much less than the original shipping orders. In some invoices the original shipping orders contains the value in US $ but the typed invoice shows the value in Hong Kong Dollars. In some invoices the description and value has been changed. The shipping orders, invoices and the Bills of entry, the details of which is given below have been seen by me and I have signed on them in today’s date in token of having seen the same.
_______________________________________________________________________________________
Shipping Order/ Value shown in Value shown in Bill of entry Value shown in
Invoice/Receiv- the original the typed in- No. and date the Bill of entry
ing Report/No. copy received voice made
and date received from supply locally
from supply station
station
_______________________________________________________________________________________
(1) (2) (3) (4) (5)
_______________________________________________________________________________________
B-05233760 $4900.00 $1193.48 51499 $1193.48
dt. 25-9-1986 dt. 3-10-1986
026-61874934 $9094.30 $938.30 068 dt. 19-4-1986 $938.30
dt. 15-4-1986
B-04792760 $5020.00 $3020.00 140 dt. 13-7-1982 $3020.00
dt. 17-6-1982
A-01065153 $2286.00 $800.00 093 dt. 3-6-1983 $800.00
dt.18-3-1983
B-004835235 $2016.00 HK$1050.00 084 dt. 16-5-1983 HK$1050.00
dt. 13-5-1983
B-03495726 $9540.00 $3020.00 157 dt. 20-8-1982 $3020.00
dt. 15-7-1982
B-04172560 $1840.00 $920.00 177 $920.00
dt. 4-9-1984 dt. 10-10-1984
01188904 $6532.00 $671.84 149 dt. 3-8-1984 $371.84
dt. 24-7-1984
B-04373530 $5600.00 $1600.00 085 dt. 18-4-1984 $1600.00
dt. 13-2-1984
B-04852363 $2016.00 HK $ 1050.00 105 dt. 1-7-1983 HK $ 1050.00
dt. 27-6-1983
A-01056123 $850.00 $60.00 173 $60.00
dt. 15-9-1983 dt. 19-10-1983
_______________________________________________________________________________________
(In the original S. No. 01056123 dt. 15-9-1983 the description of the goods is mentioned as Cargo Desk Diary and Cargo Pocket Diary, but in the typed S/O of the same No. the description is shown as Panam Brochures).
I have also seen folders marked S. No. 1 & 2 containing pages 1 to 364 and 1 to 465 there are many such cases where the value on the original shipping orders received from the supplying station is much more than the typed invoices filed by us with Bills of entry for Customs clearance. The above two folders were taken over from the Panam Office on 20-8-1987 by you. The above are only few examples of showing less value in the typed invoices which were filed with Customs alongwith the Bills of entry for Customs clearance.
I was aware of this practice of making invoices showing less value than contained on the original shipping orders but since this practice was already going on much before my arrival in India I did not interfere. I agree that the Customs duty should have been paid on the value shown in the original shipping orders and not on the fabricated invoices typed locally. I request that the amount of duty evaded by us in this manner may please be calculated and intimated to us to make the payment within a week of the calculation being seen by my representatives. I shall depute my two representatives to visit your office on Monday the 7th Sept. 1987. I shall appear before you on 9th Sept. 1987 for further enquiries in the matter.
I have given the above statement voluntarily without any pressure and is correct”.
“Statement of Mr. Wiessmenn B., Director India Panam Airways, Chanderlok, 36, Janpath, New Delhi, R/o 3/31, Shanti Niketan, New Delhi.
In continuation of my statement dt. 2-9-1987, I have to state that as stated in my above statement, I had deputed my two representatives S/Shri Ramanathan Rajan and Inder S. Sabarwal on 7th and 8th Sept ’87 to check the calculations and details regarding evasion of Customs duty. They attended your office on the above dates and checked the details and have signed on the calculation sheets in token of having checked the details about their correctness. Wherever they found any discrepancy, the same was amended. I have also seen the calculation sheets today and have satisfied myself about their correctness. The total evasion of Customs duty from 1982 to 1987 calculated so far on the invoices as mentioned in the calculation sheets (total numbering 15) comes to Rs. 29,61,527 (Rs. twenty nine lakhs sixty one thousand five hundred twenty seven only). We are prepared to pay the said amount. The payment is being made by me today through Cheque No. 009410 dt. 9-9-1987 issued in favour of Collector of Customs, New Delhi on City Bank, NA 3 Sansad Marg, New Delhi. It is requested that a copy of the calculation sheets may be given to me for record.
I have given the above statement voluntarily without any pressure and is correct”.
6. There is also no dispute that in some of the Bills of entry, the description of the goods have also been changed and the fact of substituting the original invoices received from the Supplying Station with that of fabricated invoices showing less value and sometimes, different description have been confirmed in the statement of Shri Ashok Sehgal and Shri Ramesh Chander Mr. Wiessmann and Shri Ashok Sehgal have nowhere mentioned in the statements that the invoices received from the Supplying Station were meant for debits for budgetary purposes and that the prices shown in the Bills of entry were the best judgment valuation. Moreover, Mr. Wiessmenn did not contest the correctness of value shown in the Bills of entry and he further accepted that the amount of Customs duty evaded was to the tune of Rs. 29,61,527 and issued a cheque covering the amount on 9-9-1987, though, in the reply to the show cause notice, the point has been taken by M/s. Panam Airways that the shipping orders are not invoices in the sense that they do not originate from manufacturer, admittedly the shipping orders can form the basis for valuation. In the absence of any evidence put forth by the first appellant as to what would represent the correct price of the imported goods (beyond stating that the prices mentioned in the shipping orders are only notional amounts debited for the purpose of budgetary allotment), we hold that there is nothing wrong with the adjudicating order accepting the prices mentioned in the shipping orders as the true and correct valuation of the goods and we therefore, uphold the order relating to adjustment of duty.
7. On the question of penalty, the submission made is that there was no deliberate mis-declaration as all the original documents have been preserved and produced before the officers and the duty has also been paid and therefore, no penalty should be imposed either on the company or on its officers. The adjudicating authority has gone into this aspect in detail and has given his findings in paragraphs 21.1 to 22.5. Relevant extracts from these paragraphs are reproduced below:
“21.1. I have carefully gone through the statement of Shri Wiessmenn B. Director (India) dt. 2-9-1987 who has categorically admitted that he was aware of the practice being adopted for evasion of customs duty by submitting “forged invoices” and did not stop the same since it was going on much before his arrival in India. I note from the statement of Shri Wiessmenn B. Director (India) that he has been residing in India since Jan ’86 and the malpractice of the clearance of cargo on “forged invoices” even continued after 2 years of his taking over of the head of company affairs in the country. I find no reason as to why Shri Wiessmenn B. Director (India) did not intervene in the illegal and nefarious practice being head of the organisation and chief executive of the company in India and as such mala fides on his part cannot be ruled out. Shri Wiessmenn B. being the policy implementer and top executive having a reasonable share in decision making of the company affairs being Director (India) and Regional Managing Director, Middle East/Africa could have stopped the said illegal malpractice particularly when it has adverse revenue implications for the Government, immediately on coming to know the same and could have informed the customs accordingly which would have otherwise established his bona fides. But Sh. Wiessmenn B. Director preferred to aid and abett the said unlawful practice for the revenue advantage of his company and took no steps whatsoever either to put an end to the practice nor informed the customs department. Sh. Wiessmann was having full knowledge and had reasons to believe that by wilful suppression of facts; and deliberate concealing of “original invoices”, and by fabricating forged invoices the Govt. was defrauded of its legitimate revenue. Being the head of the Company organisation in India, he allowed his officials to substitute the original invoices received from their different stations of Panam outside India with the fabricated ones (forged) showing the lesser value therein and also in certain cases even the description of the goods have been changed for the evasion of customs duty and thus caused loss of revenue to the Govt. to the tune of Rs. 29,61,527/- from the period 1982-87 knowing well that the goods so cleared by mis-statement and suppression of facts i.e. by submitting forged invoices and even changing the description of goods and the price from US Dollars to Hongkong Dollars were liable to confiscation under Section 111(m) of the Customs Act, 1962.
21.2. I have seen the statement of Sh. Wiessmann B. dt. 2-9-1988 and note that he has seen 11 shipping orders/invoices received from the foreign stations and these show that the less value in the bill of entry was shown as compared to the original copy received from the supplying station.
21.3. I have also found from the statement dt. 8-2-1987 of Sh. Wiessmann B. that he has also seen the undermentioned fabricated invoices and has confirmed that there are many such cases where the value on the original shipping orders received from the supplying station was much more than the typed invoices shown by them in the Bill of Entry for customs clearance. It has also been stated that the following are the only few examples of showing less value in the typed invoice filed with the Customs for clearance.
21.4. I note that M/s. PANAM Airways and Dr. B. Wiessmenn adopted a devil modus operands, for the systematic evasion of Customs duty by substituting the original invoices with manipulated ones ingeniously with the active connivance of the company’s officials and their CH A and could successfully hoodwink the customs for a fair long time i.e. over 10 years till these under cover and clandestine operations were busted on a specific information by the DRI.
21.5. I have seen the following few invoices (original & manipulated) and discuss as under which goes to establish the mala fides on the part of the Panam organisation as well as the concerned officials who wilfully and deliberately suppressed facts from the customs for getting revenue advantage for their organisation….”
21.11. The statement of Sh. Ashok Sehgal dt. 20-8-1987 also corroborates the fact that the manipulation of invoices/documents for showing less value of the goods imported for the purpose of evasion of Customs duty was also in the knowledge of Mr. Wiessmenn, Director, PANAM.
21.12. Shri Wiessmann, Director (India), PANAM, cannot absolve himself from his responsibility, both moral as well as legal as I note from the schematic organisational chart produced during the proceedings, duly signed by Mr. Wiessmann that being the Chief of the Company’s Management in India, he has allowed such a nefarious malpractice under his command.
21.13. I also note from the statement of Shri Ramesh Chander, an employee of M/s. Airport Handling Services their CHA, that the malpractice of evading Customs duty by substituting the original invoices in connivance in Company’s officials continuing regularly since 1976. The offence committed by M/S. PAN AM Airways with the active collusion and connivance with Wiessmann and other officials of the company, and their CHA is grave and serious and calls for very deterrent penalties on them, particularly when a company like PANAM, which is of great repute is entering into such a malpractice of manipulating invoices for duty evasion for getting monetary benefits for Company’s coffers.
22.1. I also find from his statement dt. 20-8-1987 that whenever any cargo was received, normally it was accompanied by SOB order (shipping order) and invoices. They used to hand over the said documents to M/s. Airport Handling Services; that their representative Mr. Ramesh Chander normally visited them for clearance of cargo and used to take alongwith the delivery order and connected papers to Shri Tewari, Supply Officer, who looked after the Cargo and all records pertaining to Company’s cargo are kept with him. He has also stated in his statements dt. 20th Aug ’87 and 21st Aug ’87 that the manipulated invoices were prepared with the help of one Shri Ramesh Chander, an employee of the Airport Handling Services and he used to give blank invoice forms bearing the name of M/s. Panam World Airways. I also find that from his statement dt. 21-8-1987 that he used to indicate the value to be shown in the “fabricated invoices”.
22.2. I have also seen the statement of Shri Ramesh Chander dt. 20-8-1987, wherein he has disclosed that in place of “original shipping orders”, received for higher value he used to show less value on the directions from Ashok Sehgal.
The said Ramesh Chander has further disclosed that the said practice of fabricating invoices/shipping orders was in progress since 1976.
22.3. I also find that Shri Ashok Sehgal on 20-8-1987 was confronted with SOB No. 05749354 dt. 2.1.1986 for 13 cartons of PANAM of the value of US $ 5000 appearing on p. 29 of folder No.l. I also note that he also saw invoice bearing the same number and particulars showing a value of US $ 50 at p. 30 of the said folder and signed the both invoices in token of having seen the same.
22.4. He has further explained, that on p. 29 showing $ 5000 value was correct as per original and invoice at p. 30 showing $ 50 as value was manipulated. I also note that Shri Ashok Sehgal also saw Invoice SOB No. 05154435 dt. 28-4-1986 for value 18960 N (SR) appearing on p. 13 of folder No.l and also invoice at p. 84 bearing the same number and description of goods showing total value as SR 1896.00 as manipulated. From his statement dt. 21-8-1987,1 also find that Shri Ashok Sehgal could not specify the name of any PANAM employee who had “fabricated the invoices” but stated that they had the arrangement with Shri Ramesh Chander who himself typed the “fabricated invoices” or got the same typed through some other employee for which a typewriter was kept in the Airport office. It has been also confirmed by Sh. Ashok Sehgal in his statement dt. 24-8-1987 that most of the Bills of Entry referred to in the Memo dt 20-10-1987 bore the signatures of Sh. Ramesh Chander of M/s. Airport Handling Services and some of the Bills of Entry were also signed by the officials of PANAM, when Sh. Ashok Sehgal was confronted with the statement of Shri Ramesh Chander he confessed his involvement as already stated in his statement dt. 21-8-1987. Sh. Ashok Sehgal had also produced ‘BLANK FORMS’ of Panam which were used to make fabricated Invoice Shipping Orders.
22.5. From the above, I conclusively conclude that Shri Ashok Sehgal had comprehensive knowledge about the systematic evasion of customs duty by manipulating the description of goods as well as indicating less value on the fabricated documents knowing well that the goods were liable to confiscation under Section 111(m) of the Customs Act, 1962 and as such is liable to penal action under Section 112 of the Act ibid. Since above undercover operation for the evasion of duty perpetrated with the active collusion and under the very nose of Shri Ashok Sehgal, he deserves heavy dose of penalty”.
8. For the same reasons, we hold that the appellants are liable to penal action. However, we accept the argument of Shri V. Lakshmi Kumaran that the penalties imposed on appellants Nos. 1 to 3 are excessive and disproportionate to the value of the goods in question (the value is stated to be about Rs. 26,61,527) and to the quantum of duty evaded. We therefore, reduce the penalty on appellant No.l from Rs. 75 lakhs to Rs. 25 lakhs, the penalty on appellant No. 2 is reduced from Rs. 5.5 lakhs to Rs. 2 lakhs, and the penalty on appellant No. 3 is reduced from Rs. 5 lakhs to Rs. 1.5 lakhs.
9. Shri N. Ramanathan, Id. Consultant appearing for appellants 4,5 & 6 submits that the appellant is a partnership firm carrying on business in Delhi as a licensed clearing agent and in the course of business, acts as agent of clients who import goods from abroad either in the International Airport, New Delhi or Inland Container Depot, New Delhi and clears the same through Customs on their behalf. The firm was established in 1962 as a proprietor concern and in 1963 it became a partnership. Once again in 1972, it converted into the status of proprietor concern and in March ’86, it was reconverted into a partnership firm. One of the partners is Mr. Ranganathan, the 5th appellant herein and the other partner is the son of Mr. Ranganathan. Apart from Govt. Departments and Undertakings, the appellants have been clearing goods imported by Panam (Cargo) World Airways and in these cases, the consignee’s client delivers documents such as suppliers invoices, packing list, airway bills and statutory declaration to be furnished in the Bill of Entry to the appellants who submit the same to the Customs Officer for examination. After the duty is paid, the goods are cleared from the custody of agencies such as Central Warehousing Corpn. where the goods are stored on arrival and then handed over to the consignee. The appellant has always been maintaining proper and prescribed statutory records with full details of importation. A commission between 100 to 30 rupees is received by the appellant for each such transaction, depending upon the nature of the goods and the specialised services rendered and if the appellants incur any additional expenditure for example for local transportation etc., the clients reimburse the actual expenses. The allegation in the show cause notice is that these appellants appear to have been the persons concerned in deliberate mis-declaration of value of goods imported by Panam. The appellant Nos. 4, 5 & 6 replied to the show cause notice denying the allegations and submitting that the appellants had not fabricated any of the documents and they had acted on the basis of documents furnished by Panam. The Id. Consultant submits that there is no evidence to establish that there was any intention or knowledge on the part of the appellant firm- or its partner or employee regarding fabrication of invoices or forging of documents and therefore, no penalty is warranted in these circumstances. The appellants received commission in the normal course of business and nothing extra and because of disallowance by Panam of some of the appellants bills, Shri Ramesh Chand (appellant No. 6) prepared a few kachha vouchers mentioning certain small amount of Rs. 200, 300 etc. for special services rendered so that, on that bas the appellant firm could recover the amount outstanding from Panam. The 1 Consultant submits that the adjudicating authority has dropped the charge against Mr. K. Hemrajani (Cargo Manager of Panam during major portion the period in question) on the basis that there is no independent eviden incriminating him apart from the statement of Mr. Ashok Sehgal and Rame Chander, but he has relied upon the very same statements to impose penalti on appellant Nos. 4, 5 & 6. He therefore, submits that same benefit as w granted to Shri Hemrajani should have been extended to these appellants also.
10. The findings of the adjudicating authority regarding these appi lants are contained in paragraphs 25 and 26 of the order, relevant extracts fro which are reproduced below :
“M/s. Airport Handling Services and its Managing Partner Shri Ranganathan R. (Custom House Agent).
It has been pleaded on behalf of the noticees that they were not liable for penal action as they have merely acted as the clearing agents of PANAM and have no interest whatsoever in the goods. It has been further argued that they had no hand at all in the alleged fabrication of documents and none of the fabricated invoices have been recovered from their premises. It is also stated that except for the statement of Shri Ashok Sehgal which incriminated their employee Shri Ramesh Chander, none of the other statement of Shri Ramesh Chand, Shri Ranganathan, Mr. Wiessmenn B. and Shri P. Mahendru either corroborate the deposition of Shri Ashok Sehgal or contained any evidence to establish that M/s. Airport Handling Services had either fabricated any documents or dealt with forged invoices and in the interest of justice no penal action should be taken against them on the basis of the uncorroborated testimony of Shri Ashok Sehgal as no fabrication of invoices had been made by any of their employee and the investigation had not established the identity of any person in the matter.
25.1. I have carefully gone through the statement of Shri S. Ranganathan, Managing Partner, M/s. Airport Handling Services, being the noticee in the case and note that in his statement dt. 20-8-1987 Shri S. Ranganathan has admitted that he was aware that occasionally Shri Ashok Kumar Sehgal had been asking his employee Shri Ramesh Chander to reduce the assessable value for evading Customs duty in the Bills of Entry.
25.2. I further note that M/s. Airport Handling Services who are holding licence No. 4/87 as Customs House Agent’s work is a partnership concern having S/Shri S. Ranganathan S/o late Shri N. Srinivasan Aiyer and R. Ramanathan S/o Shri S. Ranganathan its partners. It is a family outfit. I also find that they were only handling the clearance of cargo relating to M/s. Panam Airways and one of their employee, Shri Ramesh Chander was authorized to handle the documents and import of cargo by M/s. Airport Handling Services. It has been further noted from the statement of Shri Ranganathan that in cases where the assessable value was reduced by fabricated invoices, they used to charge more in respect of such Bills of Entry in the form of incidental miscellaneous charges i.e. approximately Rs. 300 to Rs. 400 extra. I have also noticed that during investigations, Shri Ranganathan was confronted with Bill of Entry No. 34679 dt. 24-6-1987 and two kachha vouchers submitted to him by Ramesh Chander wherein he had shown Rs. 100/- as miscellaneous charges on account of reducing the assessable value from US $ 108.00 to US $ 10.80 for the consignment mentioned in the said Bill of Entry. Shri Ranganathan has admitted having reduced the assessable value as mentioned above and the said Shri S. Ranganathan has also signed in token of having seen the “Kuchha Vouchers” and B/E No. 34679. Shri S. Ranganathan was also shown Bill No. 103 and 101 both dt. 23-1-1987, wherein it was mentioned “to incidental expenses incurred for saving customs duty vide details given to your Supply Officer Shri R.D. Tewari etc”. I also note that Shri S. Ranganathan has signed these papers in token of having seen the same. The explanation tendered by Shri Ranganathan in this respect is not convincing. He has stated that because that amount was disallowed by PANAM in the original bills and he was advised by Shri Ramesh Chander their employee, to prepare a bill like above and that he would get them cleared by the PANAM officials, I have reason to believe that the statement of Shri Ranganathan is not only evasive but also exculpatory.
25.3. I have also seen the statement of Shri Ramesh Chander dt. 20-8-1987 wherein he has stated that for furnishing of fabricated shipping orders and clearance of the same they used to get incidental charges ranging from Rs. 150 to 500 of which his share was Rs. 20 to Rs. 100 and the rest of the amount used to be deposited in CHA’s coffers.
25.4. I have also seen the statements of Shri Ashok Sehgal dt. 20-8-1987 and 21-8-1987, wherein it has been stated that they used to hand over the documents alongwith delivery orders to one Mr. Ramesh Chander representative of M/s. Airport Handling Services, the CHA, who in turn used to carry these documents to Mr. Tewari, the Supply Officer. The invoices which were received for a higher value were changed to show less value for customs purpose in order to save Customs duty. It has been further gathered from the statements of Shri Ashok Sehgal that he used to tell Shri Ramesh Chander, the value to be shown in the fabricated invoices and Shri Ramesh used to get the same typed or type it himself at PANAM IGI Airport Office, New Delhi on the blank forms bearing PANAM World Airways have supplied by him. It will be pertinent to note that Shri Ranganathan in his statement has clearly admitted the knowledge of evading of customs duty by his employee, Shri Ramesh Chander, in collusion with PANAM officials by fabricating invoices showing lesser value in place of original invoices of higher value received from the forwarding stations of PANAM to India and he has further gone to say that he “could not stop such unethical and illegal practice carried on by Shri Ramesh, their employee, due to the fear that PANAM, who is their valued customer, might terminate their services and they would lose business”.
25.5. It has also been pleaded on behalf of M/s. Airport Handling Services, CHA and their partner Sh. S. Ranganathan in their submissions dt. 28-9-1988 that M/s. Airport Handling Services did not have any special relationship with PANAM; that PANAM has not paid the duty in respect of some of their imports as per law and had saved some money on this account, the same has not percolated to the Agents who have not been a beneficiary of the monetary gain; that the matter of day to day work relating to clearance of goods imported by PANAM; the partner of M/s. Airport Handling Services, viz. Shri Ranganathan has taken no active role as he was mainly attending to the overall management of the office and the details of every day procedural work of PANAM’s clearance was the responsibility of their employee, Shri Ramesh Chander as brought out clearly in the statement of Shri Ranganathan and Sh. Ramesh Chand. They further submitted that in the statements relied upon by the Deptt, there was clear evidence to suggest that Shri Ranganathan did warn his employee, Sri Ramesh Chand that he should not do any unholy work, the moment, it came to his notice that the said Sh. Ramesh Chand was not aware that in one case PANAM had given documents for clearance showing less value of the goods.
25.6. It has been submitted that in the statement of Sh. Ranganathan there was a reference to the effect that he knew that PAN AM was declaring less value. It has been stated that the statement of Shri Ranganathan was given in the context of his general doubt that for some of the articles imported by PANAM for distribution to their clients etc., the value appear a little lower. That doubt, however, was not rooted on his specific knowledge that PANAM was deliberately suppressing documents showing higher values with a view to evade duty. As regards the ‘Kachha Voucher’ seized from Shri Ramesh Chander the fact remains that it was not paid and the belief of Shri S. Ranganathan was that Shri Ramesh was attempting to realise an extra amount from PANAM in that case to make up for loss sustained due to refusal of PANAM to pay some earlier bills which they did not honour fully. They had further contended that they had prepared Bills of Entry on the basis of documents given to them by PANAM and they had no knowledge that any of them were false or fabricated. It has also been alleged that the statement of Sh. Ramesh Chand was not in his own handwriting and was of Customs Officer and was not correct in any respect.
25.7. After going through the various submissions made by Shri S. Ranganathan, Managing Partner of M/s. Airport Handling Services and on their behalf, I note that Sh. S. Ranganathan, Managing Partner has given implausible explanations and evasive replies to the various pointed and direct questions to absolve himself and his concern of the responsibilities, obligations and accountability as Custom House Agent.
25.8. I have carefully gone through the submissions made by and on behalf of Sh. S. Ranganathan proprietor of M/s. Airport Handling Services. I am not inclined to accept the plea raised by them that in the matter of day to day work relating to clearance of goods imported by PANAM, the Managing Partner of M/s. Airport Handling Services, Sh. S. Ranganathan has not taken any active role, as he was only attending to overall Management of the office and the details of daily procedural work of PANAM’s clearance was the responsibility of their employee Sh. Ramesh Chand.
25.9. In terms of Regulation 14(d) of the Customs Housing Agents Licencing Regulations, 1984 made under Section 146 of the Customs Act, 1962 and issued under Notification No. 85/Customs/84 F. No. 502/8/85-Customs-6 dt. 9-3-1984. It is obligatory on the part of Customs House Agent to advise to his client to comply with the provisions of the Act and in case of non-compliance, he is required to bring the matter to the notice of the Asstt. Collector of Customs.
25.10. Further, CHA is fully responsible and accountable for all the acts of omission and commission of his employees and the plea advanced by Sh. S. Ranganathan that he was looking after overall management and rest of the daily work of PANAM was the responsibility of Sh. Ramesh Chander is untenable, ridiculous and redundant in view of the provisions contained in Regulation No. 20(7) of the CHA Licencing Regulations, 1984. Regulation 20(7) reads are under :
“The Customs House Agent shall exercise such supervision as may be necessary to ensure the proper conduct of any such employees in the transaction of business as Agent and be held responsible for all acts or omissions of his employees in regard to their employment”.
Further, in terms of Regulation 20(5) of the CHA Licencing Regulations, 1984, where the Custom House Agent has authorised any person employed by him to sign documents relating to the business of such agent on his behalf, he shall file with the Asstt. Collector of Customs, a written authority in this behalf and give prompt notice in writing if such authorisation is modified or withdrawn.
In terms of the said regulation, Shri S. Ranganathan Proprietor Airport Handling Services, has furnished a Bond dt. 15th July ’76, on a stamp paper of Rs. 10/-(Rupees ten only), prescribed by the department in favour of Shri N. Ramesh Chander son of Shri Nathu Ram, resident of House No. 4/76, W.E.A. Krishna Market, Karol Bagh, New Delhi-110005, appointing him as attorney in the name of their said firm as well his own behalf to do any of the following acts, deeds and things jointly and severally :
(a) to sign all Customs documents and bills of entry, all shipping bills, Customs bonds, all kinds of indemnities, guarantees, surety bonds and other similar documents;
(b) to sign manifests, refund orders and DBK bills;
(c) to receive money belonging to our said firm on any account whatsoever and to grant receipts therefor;
25.11. Shri S. Ranganathan, Proprietor hereby agree that all acts, deeds and things done by virtue of this power of attorney shall be construed as acts, deeds and things done by me. I further undertake to ratify and confirm whatsoever each of our said attorneys shall do or cause to be done for the said firm in the premises by virtue of the powers hereby given”.
25.13. One of the points which has been pleaded on behalf of Shri Ranganathan is that the statement of Shri Ramesh Chand, his employee, was involuntary and was also written by a Custom Officer and this does not represent the true facts of the case. I do not accept the contention of Shri S. Ranganathan that the statement of Shri Ramesh Chander was not voluntary since the said Ramesh Chand has neither retracted his statement so far; nor he has contested this point in reply to Show Cause Notice or in any other office communication.
25.14. I am not convinced with the action of Shri S. Ranganathan who has stated that he has issued a warning to Sh. Ramesh Chander which was not suffice, in view of the grave irregularities and malpractices committed by him under his very nose. Since the work and conduct of Sh. Ramesh Chander was against Govt. Revenue and contrary to the provisions of Customs law for which “Letter of Authority”, was issued to him by the deptt. to clear goods on behalf of CHA, it would have been desirable that the said Sh. Ranganathan should have reported to the deptt. and asked for cancellation of letter of Authority who was concerned in defrauding the Govt. of legitimate revenue. I am surprised to note that even till date the said Sh. Ramesh Chander holds the letter of authority on behalf of the said CHA despite abetting collossal loss to Government Revenue.
25.15. I further fail to understand as to why the said CHA continued to abet and aid illegal and nefarious practice of evading customs duty by fabricating the original invoices with the forged ones, when he came to know about this practice and it was obligatory on his part to inform the customs deptt. immediately which would have proved his bona fides; but unfortunately he preferred to be a party in defrauding the Government of its legitimate Revenue over Rs. 29 lac by aiding and undervaluation of consumable and other articles of stores abetting in by manipulating “original invoices”, and submitting the “fake invoices” for the purpose of Assessment of duty. The custom house agent is responsible for all the acts of commission and omission committed by their employees and they cannot take shelter on the plea that it was their employee in connivance with PAN AM officials fabricated the documents, when they are under legal obligation and to ensure that the import cargo is handled in prescribed manner in accordance with provisions of customs law. They have full culpable responsibility for their employees working on their behalf.
25.16. Since M/s. Airport Handling Services has got extra remunerations in their coffers for the said malpractices as admitted by Mr. Ramesh Chander, there is not an iota of doubt left with me for their deep involvement in the huge evasion of Customs duty and as such I hold that CHA has miserably failed in the discharge of their duties/obligations cast upon them under the onerous provisions of customs law and regulations made thereunder, and abetted in the evasion of customs duty of huge value in collusion with the officials of PANAM for the undue benefit for their company with interior motives in furtherance of their business interests.
25.17. It is conclusively proved and has been established beyond doubt that M/s. Airport Handling Services through Shri S. Ranganathan the Managing Director who had comprehensive knowledge that they were conniving in such grave malpractices for the undue gains for their company and of a foreign Airlines against national economic interests. In view of the evasion of duty fraud planned and perpetrated by the said CHA, by aiding and abetting in the forging of original documents through their employees which is an act highly unbecoming of a CHA; I rule that they do not deserve to continue to be custom-house agent any more and I direct the concerned authority that necessary steps be taken by the Deptt. for suspension/cancellation of their CHA licence in terms of the provisions of Customs Act, 1962 and Customs House Agents Licencing Regulations, 1984.
25.18. Since the irregularities and malpractices for the huge evasion of customs duty i.e. about Rs. 30 lac approximately (1982-87) abetted by the CHA are exceedingly grave and serious and particularly in view of the fact that they were continuing from fairly long time, they deserve severe and deterrent penalties on this context. Accordingly, I hold them liable to penal action under Section 112 of the Customs Act, 1962.
26. RAMESH CHANDER, EMPLOYEE OF M/S. AIRPORT HANDLING SERVICES
It has been contended by the noticee that he is an employee of M/s. Airport Handling Services and had nothing to gain by resorting to any illegal activities and has not done any act of omission which rendered the goods liable for confiscation and as such he was not liable for penal action under Section 112 of the Customs Act, 1962.1 also note from the reply of Shri Ramesh Chander dt. nil received on 2-3-1988 that the explanation tendered by M/s. Airport and he was an employee drawing Rs. 1,000/- per month. It has been further contended by the noticee that whatever the documents given to them by M/s. PANAM Airways, the Bill of Entry was filed on the basis of those documents and the declaration on the Bills of Entry have been attested by the senior officers of the Panam Airways as per procedure prescribed by the Customs Department. It has been further submitted that apart from the statement of Shri Ashok Sehgal which incriminated him none of the other statements either corroborated the deposition of Shri Ashok Sehgal or contained any evidence to establish that he had either fabricated document or dealt with forged invoices. Even though in the statement dt. 21-8-1987 Shri Ashok Sehgal has stated that he did not know specifically the name of persons who might have typed the fabricated invoices but in his subsequent statement he said that arrangement of Ramesh was to type himself or got the same typed by their employee.
26.1. I have gone through the statement of Shri Ramesh dt. 20-8-1987 wherein he has stated that in Panam Office Shri Ashok Kumar Sehgal is the Cargo Manager and he knew that in place of original shipping orders other shipping orders showing the less value used to be made in the office of Shri Ashok Kumar Sehgal under his (Shri Ashok Kumar Sehgal) orders and that such fabricated shipping orders/invoices were given to him with the directions to file them with the Bills of Entry. I also seen the statement of Shri Ashok Sehgal and that of Sh. Ranganathan Managing Partner of M/s. Airport Handling Services (V CHA) which has corroborated the version of Shri RameshChand. I also note that from the date of statement i.e. 20-8-1987 till the date of reply to the Show Cause Notice Shri Ramesh Chand has neither retracted Ms statement nor adduced any evidence to show that the fabrication of invoices so alleged was without his knowledge. In view of the same, I am left with no doubt and hold that Shri Ramesh Chand was in collusion with the employees of M/s. PANAM Airways in evading the customs duty by way of submitting forged invoices/shipping orders containing therein lesser value in place of original invoices alongwith the bill of entry and made false declaration under Section 46 of the Customs Act, 1962. In view of the same I hold him liable to penal action under Section 112 of the Customs Act, 1962 for his acts of omission and commission stated above. However, in view of the fact that he is an employee of M/s. Airport Handling Services (CHA) and drawing a nominal salary of Rs. 1,000/- per month I am inclined to take a lenient view.
27. From the chart (enclosed as annexure’ A’ to this order) it is evident that M/s. Panam Airways during the period 1982-87 has undervalued the goods to the tune of Rs. 21,39,568/- and cleared the same by submitting fabricated invoices rendering thereby the same liable for confiscation under Section 111(m) of the Customs Act, 1962. I, therefore, order that goods cleared during 1982-87 (and not available for confiscation) under the B/Es mentioned in the chart be held liable for confiscation under Section 111(m) of the Act ibid.”
11. From the above, it is seen that the evidence in the form of statement of Shri Ashok Sehgal and the statement of appellant Nos. 5 & 6 themselves points to complicity in the matter and their involvement in undervaluation of goods resulting in evasion of duty gives rise to penal action. In the face of the statement of appellant Nos. 5 & 6 and the statement of Shri Ashok Kumar Sehgal, appellant Nos. 4, 5 & 6 cannot plead that penal action against them should be dropped as in the case of Mr. Hemrajani. The adjudicating authority has recorded in paragraph 23.11 of his order that the most forceful plea taken by Mr. Hemrajani is that his signature nowhere appeared on any Bill of Entry/invoices nor has he presented the same to Customs for clearance and the statement of Shri Ashok Sehgal have not been corroborated by any independent evidence and that no statement has been recorded from Mr. Hemrajani himself. The statements of appellants 5 & 6 are self inculpatory and in addition corroborated by the statement of Shri Ashok Kumar Sehgal. We therefore, do not see any force in the contention of Shri Ramanathan that no penalty is imposable on appellant Nos. 4, 5 & 6. However, we agree that the penalties imposed are excessive and disproportionate. We, therefore, reduce the penalty on appellant No. 4 from Rs. 7 lakhs to Rs. 3 lakhs, on appellant No. 5 from Rs. 2 lakhs to Rs. 50,000 and on appellant No. 6 from Rs. 5,000 to Rs. 2,000/-.
12. Subject to the above modification (reduction of penalty), we uphold the impugned order and reject the appeals.