2007 (4) TMI 524 - AT - Customs

Issues Involved:

1. Liability of M/s. MNS Exports Private Limited for acts of their employees under Section 147(2) of the Customs Act.
2. Duty liability of M/s. MNS Exports Private Limited for imported consignments.
3. Imposition of penalties on M/s. MNS Exports Private Limited and its Managing Director, Shri Narayana Bhatt, under Section 112 of the Customs Act.
4. Role and penalty of Shri Vikram Jain in the fraudulent import and re-export scheme.

Issue-wise Detailed Analysis:

1. Liability of M/s. MNS Exports Private Limited for acts of their employees under Section 147(2) of the Customs Act:

The Tribunal examined whether M/s. MNS Exports Private Limited could be held responsible for the fraudulent acts of their employees under Section 147(2) of the Customs Act. The Commissioner had concluded that M/s. MNS Exports Private Limited was liable for the acts of their employees, who had fraudulently imported consignments in the name of the company and diverted them. However, the Tribunal found that the employees had acted beyond the scope of their authority and without the knowledge or consent of M/s. MNS Exports Private Limited. The Tribunal referred to various legal precedents, including the Bombay High Court's decision in M. Shashikant & Co and Others v. UOI, which held that a principal is not liable for the wrongful acts of an agent done without the principal's knowledge. The Tribunal concluded that Section 147(2) was not applicable as the fraud committed by the employees was not within the knowledge and consent of M/s. MNS Exports Private Limited.

2. Duty liability of M/s. MNS Exports Private Limited for imported consignments:

The Tribunal considered the legality of the demand for duty amounting to Rs. 34,54,338/- on M/s. MNS Exports Private Limited for the 12 consignments imported in their name but diverted by the employees. The Tribunal found that M/s. MNS Exports Private Limited neither ordered the goods nor received them in their bonded warehouse. The investigation revealed that the goods were imported fraudulently by Shri Vikram Jain with the help of a Customs Inspector and the employees of M/s. MNS Exports Private Limited. The Tribunal held that M/s. MNS Exports Private Limited could not be considered the importer of the consignments under Section 2(26) of the Customs Act as they did not hold themselves out to be the importers. Consequently, the Tribunal set aside the demand for duty.

3. Imposition of penalties on M/s. MNS Exports Private Limited and its Managing Director, Shri Narayana Bhatt, under Section 112 of the Customs Act:

The Tribunal examined the imposition of penalties on M/s. MNS Exports Private Limited and Shri Narayana Bhatt under Section 112 of the Customs Act. The Tribunal noted that there was no evidence to suggest that M/s. MNS Exports Private Limited or Shri Narayana Bhatt were involved in the fraudulent imports. The employees had acted independently and fraudulently, and M/s. MNS Exports Private Limited had taken prompt action to dismiss them upon discovering their actions. The Tribunal also criticized the poor investigation by the departmental officers, noting that no statement was taken from Shri Narayana Bhatt. The Tribunal concluded that there were no grounds for imposing penalties on M/s. MNS Exports Private Limited or Shri Narayana Bhatt and set aside the penalties.

4. Role and penalty of Shri Vikram Jain in the fraudulent import and re-export scheme:

The Tribunal reviewed the role of Shri Vikram Jain in the fraudulent import and re-export scheme and the imposition of a penalty under Section 112(b)(ii) of the Customs Act. The Tribunal found ample evidence, including statements from Shri Vikram Jain, the Customs Inspector, and the employees of M/s. MNS Exports Private Limited, to establish that Shri Vikram Jain had orchestrated the fraudulent scheme. Shri Vikram Jain had admitted to exporting and re-importing goods to avail DEEC benefits and had paid commissions to the Customs Inspector and the employees. The Tribunal upheld the penalty of Rs. 5,00,000/- imposed on Shri Vikram Jain under Section 112(b)(ii) of the Customs Act, rejecting his contention that the penalty could not be imposed due to previous penalties in related cases.

Conclusion:

The Tribunal set aside the duty demand and penalties imposed on M/s. MNS Exports Private Limited and Shri Narayana Bhatt, finding that they were not liable for the fraudulent acts of their employees. However, the Tribunal upheld the penalty imposed on Shri Vikram Jain for his central role in the fraudulent import and re-export scheme.

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