Shri Liladhar T Khusiliani vs Commissioner Of Customs-Kandla

[ Arising out of OIO-KDL/COMMR/20/2007 dtd 9.4.2007passed by Commissioner of CUSTOMS-KANDLA ]

1. Shri Liladhar T Khusiliani - Appellant(s) 2. Shri Sanjay Ahuja

Vs.

Commissioner of CUSTOMS-KANDLA - Respondent (s)

Represented by For Assessee : 1.Shri Anand Nainavati, Learned Advocate

2.Shri Paritosh Gupta, Learned Advocate For Revenue : Shri J Nair, Authorised Representative

For approval and signature :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

1 Whether Press Reporter may be allowed to see the Order for publication as per Rule 27 of the CESTAT (Procedure) Rules, 1982?

No 2 Whether it should be released under Rule 27 of CESTAT (Procedure) Rules, 1982 for publication in any authoritative report or not?

No 3 Whether their Lordships wish to see the fair copy of the Order?

Seen 4 Whether Order is to be circulated to the Departmental authorities?

Yes

CORAM :

Mr. P.K. Das, Hon'ble Member (Judicial) Mr. P.M. Saleem, Honble Member (Technical)

Date of Hearing / Decision : 18/8/2015

ORDER No. A/11288-11289/2015 dtd 18/8/2015

Per : Mr.P.K. Das,

The appellants filed these appeals against the imposition of penalty and both are arising out of a common order and therefore they are taken-up together for disposal.

2. The relevant facts of the case, in brief, are that M/s Trisuns chemical Industries Ltd (hereinafter referred to as the Company) a unit set up in Kandla Special Economic Zone, engaged in the manufacture of Castor Oil of different grades. They had another unit in Domestic Tariff Area (DTA) at Bhachau. A Show Cause Notice dtd 27.7.2004 was issued to the Company proposing demand of duty alongwith interest and to impose penalty on the said Company, amongst others, including the appellant herein. It has been alleged that the said Company had been regularly exporting their products to other countries via manipulating/forging documents to claim the export to be to Russia against payment received in Rupees whereas the consignments actually had been delivered at ports other than those in Russia. It has been further alleged that the said Company had wrongfully availed DEPB credit on Castor Oil exported by manipulating the same as DTA produced, whereas the goods originated from Kandla Special Economic Zone unit. It has also been alleged that the said Company obtained DTA License against the exports made out of the Castor Oil received from the Kandla Special Economic Zone and transferred such license to different importers, who availed exemption of customs duty under Notification No 34/97-CUS dtd 7.4.1997 as amended. By the impugned order, the Adjudicating Authority confirmed the demand of duty alongwith interest and also imposed penalties on the said Company and the appellants herein amongst others. The said Company filed appeals before the Tribunal, which was dismissed for non-compliance of the stay order.

3. In the present appeals, Shri Liladhar T Khusiliani, (in short Liladhar) Director of the said Company, filed appeal against imposition of penalty of Rs 50 lacs, 40 lacs and 25 lacs under Section 114 and 112 of the Customs act 1962 and Rule 26 of the Central Excise Rule 2002/Rule 2009A of the erstwhile Central Excise Rule 1944 respectively. Shri Sanjay Ahuja, the employee of the said Company filed the appeal against imposition of penalty of Rs 6 lacs and Rs 10 lacs under Section 112 and 114 of the Customs Act respectively.

4. Shri Anand Nainavati, Learned Advocate appearing on behalf of the Shri Liladhar submits that Shri Liladhar has no involvement and submits that it is apparent from the records that the allegations levelled against the said Company cannot be sustained as the goods were exported by the said Company. He further submits that Shri Liladhar has no involvement on the alleged irregularities. The entire case against the appellant was made out on the basis of the statement of Shri Sanjay Ahuja, employee of the said Company. The request for cross examination of Shri Sanjay was denied and there is a gross violation of principle of natural justice. He drew the attention of the Bench to the relevant portion of Adjudication Order. It is submitted that the appellant had not given any instruction to Shri Sanjay for committing any irregularity. It is further submitted that there is no import of goods and the imposition of penalty under Section 112 cannot be invoked. The goods have already been exported and penalty under Section 114 cannot be sustained. It is a case of the Revenue that the goods were cleared from DTA to SEZ and the goods were ultimately exported and therefore Rule 26 of the Central Excise Rules cannot be maintained. It is submitted that the confirmation of duty demand against the Company itself is bad in law and therefore question of imposition of penalty on the appellant does not arise. Imposition of penalty under Section 114(i) of the Customs Act 1962 is not sustainable as there was no prohibition in force in respect of Castor Oil exported by the Company. Section 112 of the said Customs Act 1962 cannot be sustained as neither the said Company nor the appellant have made any improper importation. Since, the entire quantity of Castor Oil in question has admittedly been exported, no excise duty is payable on such Castor Oil and therefore question of imposing penalty under Rule 26 in respect of clearance made from SEZ does not arise.

5. Shri Paritosh Gupta, Learned Advocate appearing on behalf of Shri Sanjay Ahuja submits that the appellant joined in the said Company at the age of 23 years and acted at the instruction of the Director of the Company. He had no knowledge of the alleged irregularity. He drew the attention of the Bench to the relevant portion of the Show Cause Notice and Adjudication Order to establish that the appellant had not gained anything and therefore no penal provision should be invoked. He relied upon the following decisions:

i) M/s Tejas Networks India Ltd vs CCE, Pondichery  2014(302)ELT.80(Tri. Chennai)

ii) M/s RK Ispat Udyog Vs CCE, Raipur  2007(211)ELT.460 (Tri.Del.)

iii) M/s Caropnter Classic Exim Pvt Ltd Vs CC, Bangalore  2006(200)ELT.593 (Tri.Bang)

iv) M/s Hazel Mercantile Ltd vs CCE, Mumbai  2014(308)ELT.113 (Tri.Mum)

6. After hearing both sides and on perusal of therecords, we find that the said Company is a public limited company. On a query from the Bench, the Learned Advocate submits that the said company was controlled by the appellant Shri Liladhar and other two family members, holding about 95% of the share and the remaining 5% are outsiders. We find that there was a demand of duty of Rs 201.50 crores and Rs 1.05 crores confirmed against the said company alongwith interest and penalty of equal amount of duty. The appeal of the said Company was dismissed for non-compliance of the Stay Order. So, there is no need to go into the merits of the case on export of the goods as the appeals of the said Company was dismissed. The Adjudicating Authority observed that the entire operation of evasion of duty and obtaining of DEPB license was carried out at the instance and direction of Shri Liladhar of the said company as evident from the statement of Shri Dyaram S Rajde (Proprietor of Ashok Bulk Carriers), Shri Sanjay Ahuja (Export Executive of the said Company) and Shri Deepak S Joshi, (Customs Clerk of the said Company) as well as facts, which were specifically brought on record. The appellant had not placed any evidence on record to refute the allegations made in the Show Cause Notice. Shri Liladhar is the master mind to export the goods to the third country and to show the shipment to be to Russia to get the payments in Indian Rupees/dollars. As per his direction, the shipping bills were used to be filed to showing the destination as St. Petersburg and the shipments were arranged. He has directed to manipulate the records. Shri Tikamchand D Khushalani was Chairman, and Shri Liladhar T Khushalani and Smt Meenakshi L Khushalani were the Directors of the said Company. Shri Liladhar had been looking after the day-to-day work of the Company at SEZ and Bhachau units and overall in-charge of the activities of the units. These facts were not seriously disputed by the appellant and therefore cross examination of his employee is not necessary. Hence, in our considered view the imposition of penalty on the appellant is justified.

7. The said Company obtained DEPB license fraudulently and facilitated the various importers to import the goods duty free and imposition of penalty under Section 112 is justified. It is noted that the said Company exported the goods in irregular manner and penalty under 114 is warranted. It is further noted that the said company cleared the goods from DTA of SEZ in violation of the Central Excise Rules and imposition of penalty under Rule 26 is justified.

8. Regarding the imposition of penalty on Shri Sanjay, we find that the appellants categorically stated that he was appointed by Shri Liladhar to prepare export related documents and other office work. He had joined in the company at a young age of 23 years. It is also stated that he was a fresh and inexperienced candidate and had no practical knowledge about office work or preparation of export documents. The Adjudicating Authority, while dealing with the case of Shri Liladhar observed that Shri Sanjay was only an employee with the said Company and there is no evidence to show that he made any earnings by forging Bills of Lading etc., which brought direct earnings for the said Company and indirect earning to its directors only. Shri Sanjay in his statements stated that he was attending the work at the instance of Shri Liladhar and he was not receiving any incentive or extra benefit for doing this work and he was doing the above work for the sake of keeping his job without any personal interest. We find that there is no material available on record with Shri Sanjay had committed any offence for his personal gain. He had acted as an employee as per the instruction of Shri Liladhar. There are series of decisions of Honble Gujarat High Court and the Tribunal that the imposition of penalty on the employee is not warranted as he acted in order to the instructions of his bosses. There is no material available that Shri Sanjay acted knowing fully of the alleged irregularity. In such situation the imposition of penalty on Shri Sanjay is not warranted.

9. In view of the above discussions, the appeal filed by Shi Liladhar T Khusiliani is rejected. The appeal filed by Shri Sanjay Ahuja is allowed.

(Dictated and pronounced in the Court)

(P.M. Saleem) (P.K. Das) Member (Technical) Member (Judicial)

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