M M SHAH Vs. DEPUTY DIRECTOR ENFORCEMENT

JUDGEMENT

(1.) The above Appeal raises the following question of law:

(2.) The facts necessary to be cited for adjudication of the above Appeal can be stated thus: The Appellant during the relevant period i.e. 161994 to 2821997 was the paid Managing Director of the Company known as Indian Card Clothing Ltd. (for short ICC), a public limited company. The Appellant was devoting his full time attention to the affairs of the ICC and retired from the said Company in the year ending 2001. The said ICC and one Spifa Germany promoted a Joint Venture Company known as Suessen Asia Ltd. (for short SA Ltd.) wherein Spifa Germany was to hold 60% equity and ICC was to hold 40% equity. By a resolution dated 2761994 passed by the S A Ltd., the Appellant was to be concurrently appointed as the Managing Director of S.A.Ltd effective from 181994 at nil salary for a period of 5 years on the terms and conditions as mentioned in the contract which was tabled at the meeting. However, the said contract did not fructify as the ICC Board was not in favour of having concurrent Managing Directors for two companies and, therefore, by further resolution dated 2991994, the Appellant's appointment as the Managing Director of S.A.Ltd, was deferred till further notice. By further resolution passed by the Board of S.A. Ltd. dated 971997, it was reiterated that the Appellant was not appointed as Managing Director of S. A. Ltd and that his appointment was deferred, since the Appellant could only periodically visit the factory of S.A. Ltd as a nominee Director of ICC Ltd. The S. A. Ltd appointed one Mr. Oberoi as the Managing Director of S.A.Ltd. In 1997. Since the Appellant has been held to be responsible for the evasion of customs duty, by the said S.A. Ltd, it would be necessary to go into the factual background in respect of which, the penalty has now been imposed upon the Appellant in his capacity as a Managing Director of the said S.A. Ltd.

(3.) It appears that in furtherance of its intentions the Spifa which held 60% shares in S.A. Ltd, entered into Licence Agreement with it for the manufacture of textile machinery and its components on account of which, several capital goods, spare part and raw materials were required to be imported by the S.A. Ltd from Spifa. It appears that to expedite the said process of acquisition of certain spare parts on certain occasions, S.A. Ltd imported such items through the baggage of several personnel of Spifa visiting India and/or the personnel of S. A.Ltd. who were returning from Germany to India. It is the case of the Appellant that the said imports were covered under the Open General Licence and, therefore, did not require any import licence and that through over sight and inadvertence the baggage imported was not declared by the personnel of Spifa and/or S.A.Ltd to the Customs authorities. On investigation, the Commissioner of Customs issued a show cause notice dated 1571998 and called upon the S.A. Ltd to explain the non payment of customs duty on items imported through baggage. It is the case of the Appellant that there was no allegation against the Appellant for alleged infraction of Customs Law or baggage Law nor was he made a party to the said show cause notice. The said show cause notice culminated in the order dated 3131999 passed by the Commissioner of Customs who inter alia held that the employees of S. A. Ltd had failed to declare the contents of their baggage under Section 77 of the Customs Act, 1962 which has led to the evasion of Customs Duty to the tune of Rs.25,99,941/and that the dutiable goods imported in personal baggage were classifiable under the head 98.03 of the Schedule to the Customs Tariff Act, 1975. The Commissioner by the said order refrained from confiscation of the goods, as he was of the view of the penal action under Section 112 of the Customs Act would be sufficient to meet the ends of justice and although the show cause notice demanded the duty of Rs.27,01,755/, the duty adjudicated was lesser i.e. Rs.25,99,941/.