2005 (4) TMI 326 - AT - Customs

Export of plastic woven sacks to Russia - export obligations under DEEC Scheme - Show cause notice - Documents - Notice of the personal hearing - Service of - confiscation - Penalty - HELD THAT - As per the findings contained in the impugned orders the value of goods which were imported duty free and which had been diverted to domestic market is Rs. 19.96 crores, 7.63 crores and Rs. 10.13 crores in three cases and the Customs duty involved is Rs. 20.37 crores, Rs. 5.74 crores and Rs. 11.74 crores respectively. Similarly, where the goods have been exported or attempted to be exported, the value of such goods are Rs. 4.59 cores, 23.33 crores plus Rs. 7.53 crores and Rs. 13.30 crores. Import/Export of goods on such a large scale and violations of the enactments can not be made without the authority of Chairman and Managing Director. The Chairman and Managing Director of a Company deal with the policy matters and these imports and exports of such a magnitude and diversion of imported goods into domestic market and over valuation of the export goods are the acts of commission which have to be taken by the senior functionaries of the Company. No reasonable/prudent man can say that such an act of commission will be done by a lower functionary without the direction of Chairman/Managing Director. Once the Adjudicating Authority has discussed the liability to penalty in the impugned orders, the penalties are imposable on Chairman and Managing Director even if there is no separate mention of them in Order-in-Original. We, therefore, hold that penalties are imposable on Shri O.P. Agarwal and Shri B.K. Karnawat. The other two appellants Shri Dinesh Thakur and Shri B.L. Dhaluka are General Manager. As per the statement dated 31-5-1996, Shri Dinesh Thakur looks after the imports of the Company from Calcutta and exports production/processing are being looked after by Shri B.L. Dhaluka. He has further deposed that Shri B.L. Dhaluka mainly gives instructions regarding supply of the raw material (plastics) to processors and Dinesh Thakur gives instructions for supply of raw material. Being employees of the Company, they are carrying out the orders given to them. As held by this Tribunal in the case of Z.U. Alvi v. CCE, Bhopal 2000 (1) TMI 79 - CEGAT, COURT NO. I, NEW DELHI , Appellants as employees could not have an existence independent of Company. They are not the persons in-charge or were responsible for the conduct of the business of the Companies. They had no dealings with the impugned goods otherwise than in their official capacity as employers of the Companies who indulged in malpractices. In view of this penalty under the provisions of Customs Act is not imposable on both Shri Dinesh Thakur and Shri B.L. Dhaluka. We, therefore, set aside all the penalties imposed on them. All the Appeals are disposed of in the above manner.

Issues Involved:
1. Imposition of penalties under Section 112 and Section 114 of the Customs Act, 1962.
2. Allegations of overvaluation of export goods.
3. Diversion of imported goods to the domestic market.
4. Non-fulfillment of export obligations under DEEC Scheme.
5. Alleged violations of the principles of natural justice.
6. Personal liability of company officials for penalties.

Detailed Analysis:

1. Imposition of Penalties under Section 112 and Section 114 of the Customs Act, 1962:
The common issue across the appeals is whether penalties under Section 112 and Section 114 of the Customs Act, 1962, are imposable on the appellants. The Tribunal upheld the penalties on the Chairman and Managing Director, noting that the large-scale import/export operations and violations could not have occurred without their authority. The penalties were adjusted to more reasonable amounts, considering the scale of the violations.

2. Allegations of Overvaluation of Export Goods:
M/s. Ganpati Combines Ltd. and M/s. Ganpati Exports Ltd. were found to have overvalued plastic woven sacks exported to Russia by declaring values significantly higher than actual. The Commissioner confirmed this overvaluation and imposed penalties accordingly. The Tribunal found no challenges to these findings and upheld the penalties.

3. Diversion of Imported Goods to the Domestic Market:
M/s. Ganpati Combines Ltd. and M/s. Ganpati Commerce Ltd. imported plastic granules duty-free but diverted them to the domestic market instead of using them for manufacturing export goods. The Commissioner confiscated the goods and imposed penalties. The Tribunal upheld these penalties, noting the large scale of the operations and the involvement of senior company officials.

4. Non-fulfillment of Export Obligations under DEEC Scheme:
The companies failed to fulfill their export obligations under the DEEC Scheme by either not exporting the goods or exporting to non-designated areas. The Commissioner imposed penalties for these violations, which the Tribunal upheld, emphasizing the responsibility of senior officials in ensuring compliance with export obligations.

5. Alleged Violations of the Principles of Natural Justice:
The appellants argued that the orders were passed in violation of natural justice principles, as they were not provided with relied-upon documents and were not given a proper hearing. The Tribunal found that the documents were indeed provided, and the appellants did not substantiate their claims of not receiving hearing notices. Thus, the Tribunal dismissed these arguments.

6. Personal Liability of Company Officials for Penalties:
The Tribunal differentiated the liability of senior officials (Chairman and Managing Director) from that of General Managers. It upheld penalties on the Chairman and Managing Director, citing their roles in policy-making and large-scale operations. However, it set aside penalties on the General Managers, noting they acted in their official capacities without independent authority over the company's actions.

Conclusion:
The Tribunal upheld the penalties on the Chairman and Managing Director of the companies, adjusting the amounts to reasonable levels, while setting aside the penalties on the General Managers. The appeals were disposed of accordingly.

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