2019 (6) TMI 78 - AT - Customs

Penalty u/s 112 of the Customs Act, 1962 - Directorship in two companies simultaneously - diversion of PVC-resins - HELD THAT - The present appellant resigned from directorship of both the companies in April-June, 2004, on coming to know of the nefarious activity and intention of Mr. Vinod Kumar Bansal. Further, the Addl. DGFT, New Delhi have in appellate orders, mentioned hereinabove, ordered deletion of name of this appellant from the adjudication orders, with respect to the disputed Advances Authorisation Licenses . Further, the adjudicating authority have not found complicity on the part of the present appellant. Rather it is the finding that Mr. Vinod Kumar Bansal in collusion with Mr. Vinod Kumar Garg of Veekay Poly Coats Ltd., imported and diverted the PVC-resins, in violation of the conditions of the Advance Authorisation Licence. This appellant, being an employee, only accepted directorship of the two companies under instructions of his employer, and was not personally involved. The penalty under Section 112 is reduced to ₹ 50,000/- - appeal allowed in part.

Summary

Issues:
Appeal against penalty imposed under Section 112 of the Customs Act, 1962.

Detailed Analysis:

1. Background and Facts:
The appellant, an MBA, was associated with companies involved in manufacturing PVC pipes. The main shareholder, Shri V.K. Bansal, established new companies where the appellant held director positions. Allegations of non-fulfillment of export obligations led to penalties imposed on the companies and their directors, including the appellant.

2. Legal Proceedings and Orders:
The Additional DGFT modified the adjudication order by deleting the appellant's name. Civil suits were filed by the appellant to establish non-liability for the companies' debts. Similar penalties were imposed on another company controlled by V.K. Bansal, where the appellant was also involved, but his name was eventually deleted from the order.

3. Allegations and Investigations:
V.K. Bansal was accused of diverting raw materials meant for manufacturing and export purposes. Show cause notices proposed confiscation of imported goods and imposition of penalties under Section 112 of the Customs Act on the directors, including the appellant.

4. Defenses and Settlements:
The appellant denied involvement in the import and diversion of raw materials, citing his resignation and lack of association with the companies. Settlements were mentioned before the Settlement Commission, granting immunity to others involved.

5. Arguments and Findings:
The Revenue's representative argued against benefiting from settlement orders and alleged complicity in fraudulent activities. However, the tribunal found the appellant innocent of direct involvement, noting V.K. Bansal's role as the mastermind behind the illegal activities.

6. Judgment and Conclusion:
The tribunal allowed the appeal in part, reducing the penalty imposed under Section 112 to ?50,000. It acknowledged the appellant's resignation upon discovering the fraudulent activities and lack of personal involvement. The appellant was granted consequential benefits as a result of the reduced penalty.

This detailed analysis covers the legal judgment involving penalties imposed under the Customs Act, 1962, highlighting the appellant's innocence in the fraudulent activities orchestrated by the main shareholder of the companies.