NITIN SHIRSAT Vs. UNION OF INDIA

JUDGEMENT

(1.) The petitioner claims to be the proprietor of a concern which engages in the export of ready made garments. According to the petitioner, between May and September 2008 his concern had received orders for the supply of garments from buyers in UAE and London and that in accordance with those orders exports were carried out under 14 invoices and 56 shipping bills. The petitioner claims that the export value was Rs. 27.05 crores of which only a partial amount was realized. The petitioner states that exports have been carried out between 26 March, 2008 and 22 September, 2008. The export proceeds should have been received within one year and despite a follow up the foreign buyers had not remitted the proceeds. The petitioner obtained a duty drawback of Rs. 3.04 crores. In these proceedings the petitioner has sought to challenge two communications; (i) A letter dated 18 May, 2010 of the Deputy Commissioner of Customs to the Vijaya Bank seeking a disclosure of certain documents pertaining to the transactions carried out in the current account and directing the bank that no debit from the account should be allowed till further communication; (ii) A communication dated 29 December, 2011 to the petitioner calling upon him to pay back the drawback received together with interest under Rule 16A of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 failing which action for recovery would be initiated. Four submissions have been urged on behalf of the petitioner in support of the petition; (i) No adjudication has taken place against the petitioner; (ii) There was non application of mind by the officer while taking steps purportedly under Sec. 110 of the Customs Act, 1962 since the notice to the bank in fact relies upon the provisions of Sec. 121; (iii) The period of six months under Sec. 110(2) for the issuance of a notice to show cause under Sec. 124(a) has elapsed upon which the petitioner would be entitled to a return of the goods seized. Consequently, there in no justification for the continuance of the order of restraint on the operation of the bank account; and (iv) The procedure under Rule 16A has not been followed.

(2.) An affidavit in reply has been filed in these proceedings by the Deputy Commissioner of Customs. The reply states that the petitioner was exporting ready made garments under the duty drawback scheme which were procured from domestic suppliers at prices ranging from Rs. 31 to Rs. 40 per piece, but which were declared at an FOB value of Rs. 340 to Rs. 360. The petitioner claimed a drawback of Rs. 31 per piece which was the maximum amount which could be claimed at the rate of 8.80% of the FOB value with a cap value of Rs. 31 per piece. The petitioner claimed a total duty drawback of Rs. 3 crores of which Rs. 2.95 crores was availed of against a declared export value of Rs. 31.12 crores in respect of goods exported under 56 shipping bills filed during the period from 14 July, 2008 to 19 May, 2009. A chart which has been annexed to the affidavit in reply indicates that several firms, including Nitin Exports of which the petitioner claims to be a proprietor, were involved in the export of goods for a total declared FOB value of Rs. 111.53 crores against which a remittance of Rs. 20.19 crores was received leaving a balance representing 82% of the FOB value outstanding. The modus operandi, it is submitted on affidavit, was to declare an FOB value to the maximum extent so that the drawback eligible would be equal to or near about the drawback cap value of Rs. 31 per piece. The remittance realized against the inflated FOB value against the initial consignments exported was in connivance with the overseas buyers based in Dubai/Sharjah reimbursed by subsequent consignments exported to the same firms or other connected firms. In all cases, exports were carried out by the said firms through buyers situated in the UAE. According to the department, one of the companies, Vishal Plastomers Private Limited, had a Managing Director by the name of Pradeep Mehta. Pradeep Mehta denied in his statement before the Investigating Officer that he had anything to do with the exports conducted by the firm. However during the investigation the petitioner stated that it was Pradeep Mehta who had financed, managed and executed the business conducted by his firm. The petitioner stated that he had no knowledge about the business of import or export nor did he have any orders. The petitioner worked for Pradeep Mehta and his firm was floated on the instructions of that person. The petitioner had no share in the business. The petitioner stated that Pradeep Mehta was the owner of that goods exported under 56 shipping bills and Nitin Exports was only the medium for carrying out the export. The petitioner denied knowledge of the transactions in the current account of Vijaya Bank and stated that apart from having visited the bank for the opening of the account, he had merely signed blank cheques under the instructions of Pradeep Mehta at whose instructions all the transactions were carried out. Moreover it has been stated that out of the aggregate deposits related to the sale proceeds of Rs. 8.45 crores in the account, a sum of Rs. 6.60 crores was utilized for the purchase of gold bullion. The petitioner stated that it was Pradeep Mehta who had purchased the gold and that he had no knowledge of those transactions. The petitioner claimed that he had received an amount of Rs. 30 to 35 thousand from Pradeep Mehta in installments of Rs. 5000/ - from time to time. Since Pradeep Mehta was avoiding service of summons issued to him, the department had to approach the Sessions Court at Alibag to secure his attendance before the Investigating Officer. The investigation has been concluded and it has been stated that the department is in the process of issuing a comprehensive show cause notice.

(3.) Sec. 110(1) provides that if the proper officer has reason to believe that any goods are liable to confiscation under the Act, he may seize such goods. The expression "goods" is defined in Sec. 2(22) to include in sub -clause (d) currency and negotiable instruments. Under sub -section (2) of Sec. 110 where any goods are seized under sub -section (1) and no notice in respect thereof is given under clause (a) of Sec. 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized. The Commissioner is empowered to extend the period of six months for sufficient cause by a further period not exceeding six months. Under subsection 3 of Sec. 110, the proper officer is authorized to seize any documents or things which, in his opinion, will be useful for, or relevant to, any proceeding under the Act. In view of the comprehensive definition of the expression "goods" in Sec. 2(22) to cover currency and negotiable instruments, there can be no manner of doubt that the power under Sec. 110 can be exercised in respect of such goods, provided the proper officer has reason to believe that they are liable for confiscation under the Act.