2004 (97) ECC 16 (Tri)

CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL

New Delhi -- Bench-NB(A)

Shri V.K. Agrawal, Member (T) and Shri P.G. Chacko, Member (J)

C.C., ICD, TDK, New Delhi

Versus

Cyber Express Pvt. Ltd.
(Now known as M/s. Discware Pvt. Ltd.)

Appeals No. C/141/02-NB(A) & C/428-30/03-NB(A)

[Arising out of Order-in-Original No. SKS/CC/ICD/TKD/124/2000 dated 8.12.2000 passed by the Commissioner (Customs), New Delhi]

Final Order No. 803-806/2004-NB(A), dt. 2.8.2004, Certified on 10.8.2004

Confiscation & Penalty (Customs)

Corporate veil -- Export -- Master C.D. ROMs of C.D. ROMs -- Goods grossly over-invoiced for availing under DEPB credit -- There is sufficient evidence to prove that neither the transactions were genuine nor the disclosed value was correct and Director of the company who is managing the affairs of the company shall be liable for penalty and over pricing the export goods has rendered the goods liable for confiscation under Section 113 r/w Sec. 114 of Customs Act.

PRESENT :

Shri S.M. Tata, SDR for the appellant.

None for the respondent.

Cases Cited :

1. Joginder Nath Mehra v. CC, Mumbai, 2000 (71) ECC 779 (T)............................. [Para 3]

2. Santanu Ray v. Union of India, 1988 (8) ECC 51 (Del)....................................... [Para 3]

3. T.I. Stephen, AIR 1998 SC 994....................................................................... [Para 3]

Per : V.K. Agrawal

These are four appeals, filed by the commissioner of Customs against the Order-in-Original No. 124/2000 dated 8.12.2000, by which the Commissioner (Customs) has confiscated CD Roms under Sec. 113(d) of the Customs Act with an option to redeem the same on payment of fine of Rs. 50 lakhs and imposed penalty on M/s. Cyber Express Pvt. Ltd. The Commissioner, however, has not imposed penalty on other respondents, namely, Shri G.D. Bhaiya and Sh. Sachin Bhaiya, both Directors in the respondent company and Shri Gope Lakhaney, General Manager.

2. All the four appeals have been filed in terms of the Review Order No. 261-R-2001 dated 7.12.2001 passed by the Central Board of Excise & Customs in exercise of the powers under Section 129D (1) of the Customs Act. It is mentioned in the Review Order that the Board is of the view that the impugned order is not legally correct and proper inasmuch as Commissioner has refrained himself from imposing any penalty on Shri G.D. Bhaiya, Shri Sachin Bhaiya and Shri Gope Lakhaney. In view of this, no prayer has been made against M/s. Cyber Express Pvt. Ltd. though the appeal has been filed against them also. In view of this, the appeal, filed against M/s. Cyber Express Pvt. Ltd. is infructuous and is dismissed as such.

3. When the matters were called, no one was present on behalf of one of the respondents. We also observe that as and when the matters were posted for hearing, no one has appeared on behalf of the respondents. We, therefore, heard Shri S.M. Tata, learned SDR, and perused the records for disposing of the appeals. The learned SDR, submitted that M/s. Cyber Express Pvt. Ltd. had filed 8 shipping bills all dated 6.10.88 for export of 2,05,000 pieces of CD Rom titled as "Nine-in'One" under Duty Entitlement Pass Book (DEPB) Scheme; that the FOB value declared collectively amounted to Rs. 15,41,04,062; that pursuant to an intelligence report that the goods had been grossly over-invoiced for availing undue DEPB credit, the goods were seized and show cause notices were issued for confiscating the same and for imposing the penalty on respondents under Sec. 114 of the Customs Act; that the Commissioner has not imposed any penalty on any of the Directors and General Manager on the ground that there was no evidence, explanation or reason to even suggest that any of these three respondents was involved in infringement of the provisions of Customs Act in their personal capacity. The learned SDR, further, submitted that the Commissioner has observed while refraining himself from imposing any penalty on these respondents that the exporter being an incorporated company, is protected by the corporate veil which cannot be lifted unless there is some specific proof to establish that the Directors or any employee had contravened the law for personal gains; that such finding is not legal and tenable, as has been held by the Supreme Court in the case of T.I. Stephen (AIR 1998 SC 994) that the company cannot act by itself and it has to act through someone; that the Appellate Tribunal in the case of Joginder Nath Mehra v. CC, Mumbai, 2000 (71) ECC 779 (T) : 2000 (119) ELT 102 (T) has held that the Directors, who play pre-dominant role in the scheme of creation of the corporate veil are liable for penal action under provisions of Customs Act. Reliance has also been placed on the decision of the Delhi High Court in the case of Santanu Ray v. Union of India, 1988 (8) ECC 51 (Del) : 1988 (38) ELT 264 (Del) wherein it has been held that "any Director, who is a party to the fraud or to the commission of any other tort, is personally liable".

4. The learned SDR, further, submitted that Shri G.D. Bhaiya, had avoided answering the questions relating to the valuation and genuineness of the CD Roms exported and attempted to be exported on one pretext or the other; that the cost actually incurred by M/s. Cyber Express Pvt. Ltd., was around Rs. 30 per piece whereas the value of CD Roms declared for the purpose of DEPB was Rs. 750 per piece; that in spite of opportunity being given to Shri G.D. Bhaiya, no plausible explanation was given by him to explain the bonafideness of the declared value and non-realisation of export proceeds in case of exports made earlier. He also mentioned that Shri Sachin Bhaiya, Son of G.D. Bhaiya is also another Director in M/s. Cyber Express Pvt. Ltd and is, thus, equally responsible for the wrong-doing by the other Director or any employee of the company as he was equally benefited from the profit earned by the company. Finally, he mentioned that Shri Gope Lakhaney, General Manager is the senior-most officer of M/s. Cyber Express Pvt. Ltd. and was also authorised signatory of the company; that he had attended all the Customs work relating to import and export and he had himself given costing of master CD Roms at Rs. 20 per piece and, therefore, export value of CD Roms at Rs. 750 was declared knowingly and willingly with intent to avail higher DEPB credit fraudulently.

5. We have considered the submissions of the learned SDR and perused the records. We observe that the Commissioner has given a specific finding in the impugned order that reports received from UK & USA, contain ample evidence in establish requisite probability that the buyer the consignee could be fictitious and transaction being not genuine. The Commissioner has also given his finding that the evidence advanced by the Department and the respondents failed to explain the facts as to who was the buyer of the goods, being exported by them, lead to an inference against the respondents and in favour of the Department and prove the point that the buyer and the consignee did not have identifiable business and location and deal was mysteriously not genuine. It has also been mentioned in the impugned order that the exports worth Rs. 23.5 crores (approx.) made earlier by M/s. Cyber Express Ltd. in respect of DEPB credit of Rs. 4.57 crores had already been allowed and four containers were still lying uncleared at the Port of destination even after 8 months of shipment and five of the buyers were found to be fictitious with no identifiable business, location or activity. No appeal appears to have been filed by M/s. Cyber Express Pvt. Ltd. against the finding of the Commissioner that there is sufficient evidence to prove that neither the transactions were genuine nor the disclosed value was correct and obviously one of the motives behind this declaration was to avail the DEPB in unlawful manner in excess of the actual. In absence of any appeal, being filed by M/s. Cyber Express Pvt. Ltd., these findings of the Commissioner in respect of confiscation of goods and imposition of penalty on Cyber Express Pvt. Ltd., have attained finality. Shri G.D. Bhaiya has floated company alongwith his son, Shri Sachin Bhaiya. Shri G.D. Bhaiya, is the Director of the Company who is managing the affairs of the company. Section 114 of the Customs Act provides that any person, who in relation to any goods, does or omits to do any act which act or omission would render the goods liable to confiscation under Sec. 113 of the Customs Act, shall be liable for penalty.

The action by Shri G.D. Bhaiya, in exporting the goods to the buyer, who did not have identifiable business and location and over-pricing the export goods has rendered the goods liable for confiscation under Sec. 113 of the Customs Act. As a consequence of it, penalty is imposable on G.D. Bhaiya. The principle of corporate veil mentioned by the Commissioner in the impugned order is not applicable while imposing penalty on the persons whose acts or omissions rendered the goods liable for confiscation under the provisions of Customs Act. This was the view expressed by the Delhi High Court in the case of Santanu Ray (supra) where the Court has held that "after the veil of the corporate entity is lifted, the adjudicating authorities will determine as to which of the Directors is concerned with the evasion of the excise duty by reason of fraud collusion", etc. We, therefore, hold that the penalty is imposable on Shri G.D. Bhaiya. A penalty of Rs. 5 lakh on him would meet the ends of justice. We order accordingly. The Department has not made out any case for imposition of penalty on Shri Sachin Bhaiya as no acts or omissions on his part has been brought on record. The penalty is not imposable on Shri Gope Lakhaney as he is following the directions and orders of Shri G.D. Bhaiya, Director. We, therefore, reject the appeals of the Revenue in respect of Shri Sachin Bhaiya and Shri Gope Lakhaney. All the appeals are disposed of as indicated above.

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