2012 (10) TMI 981 - AT - Customs

Penalty u/s 112(b) of the Customs Act, 1962 - final product was being cleared by the 100% EOU in the local market - physical exports were shown only on paper - advance licences and advance release orders were fake and forged - Difference of opinion - Majority order - Held that - The expressions fake, forged or fictitious - nowhere came on record in the statements of any of the persons, including the present appellant. It nowhere stood admitted by the appellant that he was aware of the fact of said licences being forged. The Revenue has heavily relied on the findings recorded by the learned Member (Technical). However, it is seen that procurement of licences from Shri R.K. Gupta has not been disputed anywhere. It is also not disputed that other persons namely Shri K.D. Sharma and Shri Nitin Rastogi also used to buy licences from Shri R.K. Gupta. Filing of anticipatory bail by Shri R.K. Gupta is also not in dispute - No evidence suggests that the present appellant sold the licences directly to 100% EOU on such premium. In absence of any cogent evidence, although circumstances may raise grave suspicion, I am unable to hold that the appellant was aware that the licences were fake, forged or fictitious. Efforts made by DRI officers to locate Shri R.K. Gupta, has not resulted in any fruitful result. The appellant during the course of his interrogation, also disclosed the names of one Shri K.D. Sharma and Shri Nitin Rastogi as the persons who used to buy licences from Shri R.K. Gupta. These persons have also admitted the same. Not only that, he also disclosed the case file number where Shri R.K. Gupta has filed anticipatory bail in Sessions Court of Delhi. Shri R.K. Gupta s affidavit was also on record. No evidence of further sincere investigations on all these evidences by DRI is forthcoming. - it is seen that no serious efforts to trace Shri R.K. Gupta, by taking help of Shri Nitin Rastogi, Shri K.D Sharma. the court records in the Court of District Sessions Judge, Delhi are forthcoming from the records. It therefore appears that no serious efforts were made to locate Shri R.K. Gupta Solely on the basis of the appellant s oral statement, it cannot be established that he was aware that no goods would be cleared but only paper transactions will be made. Moreover, when it is established that the appellant was not even known to the concerned directors/persons of the said 100% EOU, the question of aiding and abetting them would not arise. It is trite that to attract penalty, the penal provisions would require strict interpretation. Even if the present appellant dealt with the licences, he has not dealt with any goods in any manner nor is there any such allegation. Without dealing with the goods in any manner whatsoever, in the facts of the instant case, the ratio laid down in the Larger Bench decision of this Tribunal in case of M/s. Steel Tubes of India Ltd. v. CCE, Indore as reported in 2006 (10) TMI 146 - CESTAT, NEW DELHI LB would be a binding precedent, wherein it was held that penalty is imposable under Rule 209A only if excisable goods are dealt with by the person concerned with knowledge of liability of confiscation, and that even where any person has issued only invoices without actual movement of the goods, the said rule cannot be pressed into service for imposing penalty. - neither the appellant has dealt with or transacted for the goods in any manner, nor has it been established that he was aware about forged/fake nature of the licences. Since, none of the acts referred to in Section 112(b) of Customs Act, 1962 are proved against the appellant, imposition of penalty under Section 112(b) also cannot sustain. - Decided in favour of appellants.

Issues Involved:
1. Whether the appellant was aware that the licenses were fake, forged, or fictitious.
2. Whether the DRI made serious efforts to trace Shri R.K. Gupta.
3. Whether the appellant was aware of the misuse of the licenses by M/s. Kay Bee Tex Spin Ltd. for showing fictitious export and thus aiding and abetting the 100% EOU.
4. Whether the appellant dealt with the goods and is liable to penalty under Rule 209A of C.E.R., 1944 and Section 112(b) of the Customs Act, 1962.

Issue-Wise Detailed Analysis:

1. Awareness of Fake, Forged, or Fictitious Licenses:
The Tribunal examined whether the appellant knew the licenses were fake, forged, or fictitious. The Member (Technical) concluded that the appellant was aware, based on circumstantial evidence such as the high premium of 30% and the understanding that no supplies would be made, only paper transactions. The appellant's involvement in a previous case related to forgery of shipping bills and DEPB licenses was also considered. However, the Member (Judicial) found no direct evidence proving the appellant's awareness, noting that the appellant procured licenses from Shri R.K. Gupta and no evidence suggested the appellant knew the licenses were forged. The third Member (Judicial) agreed with the Member (Judicial), concluding that the circumstances did not sufficiently prove the appellant's awareness of the fake nature of the licenses.

2. Efforts to Trace Shri R.K. Gupta:
The Member (Judicial) noted that the DRI's efforts to locate Shri R.K. Gupta were not fruitful and that the appellant provided names of other persons who bought licenses from Shri R.K. Gupta, which were not further investigated. The Member (Technical) detailed the DRI's efforts, including multiple summons and verification of addresses, but ultimately concluded that the DRI made serious efforts. The third Member (Judicial) found that the DRI did not make serious efforts to trace Shri R.K. Gupta, agreeing with the Member (Judicial) that the investigations were insufficient.

3. Awareness of Misuse by M/s. Kay Bee Tex Spin Ltd.:
The Tribunal considered whether the appellant was aware of the misuse of licenses by the 100% EOU for fictitious exports. The Member (Judicial) found no evidence implicating the appellant in the misuse, noting that none of the statements from the 100% EOU's directors or employees mentioned the appellant. The Member (Technical) concluded that the appellant knew about the paper transactions and aided the 100% EOU. The third Member (Judicial) agreed with the Member (Judicial), finding no evidence that the appellant was aware of the misuse or aided the 100% EOU.

4. Dealing with Goods and Liability to Penalty:
The Tribunal examined whether the appellant dealt with the goods and thus was liable to penalty. The Member (Judicial) referred to the Larger Bench decision in M/s. Steel Tubes of India Ltd., which held that penalty is imposable under Rule 209A only if the person dealt with excisable goods with knowledge of liability of confiscation. The Member (Technical) argued that the appellant's involvement in the transactions was sufficient to impose a penalty. The third Member (Judicial) agreed with the Member (Judicial), concluding that the appellant did not deal with the goods and thus was not liable to penalty under Rule 209A or Section 112(b).

Conclusion:
The majority order, based on the third Member (Judicial)'s agreement with the Member (Judicial), concluded that the appellant was not aware of the fake nature of the licenses, the DRI did not make serious efforts to trace Shri R.K. Gupta, the appellant was not aware of the misuse by the 100% EOU, and the appellant did not deal with the goods. Therefore, the penalties imposed on the appellant were set aside, and the appeals were allowed.

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