Kiran Nagindas Vora of Mumbai vs The Commissioner of Customs (Export)

S.C. Dharmadhikari, J.—These two appeals by Kiran Nagindas Vora and Iqbal Mohan Amritlal Mehra challenge a common order passed by the Customs, Excise and Service Tax Appellate Tribunal, Bench at Mumbai.

In the appeal of Shri Kiran Vora it is submitted that there are substantial questions of law and which have been raised for consideration and determination by this Court. From the record, it appears that the appeals of Shri Vora appeared on Board for admission but this Court, at the request of the advocates directed that not only the appeals of Shri Vora, but that of Shri Mehra be placed for admission and they be heard together. As far as Shri Vora is concerned, the order under challenge is passed on 26th September, 2013 in Appeal No. C/1049/2009. The Tribunal reverses the finding and conclusion of the Commissioner and holds that the said Vora is also involved in the transactions and which led to inflated and bogus claims of refund/rebate/drawback. Therefore, it decided to impose penalty of Rs. 15 lakhs under section 14(1) of the Customs Act, 1962. There are two appeals against two orders of the Commissioner exonerating and dropping the proceedings against Shri Vora and which appeals of the Revenue were dealt with by the Tribunal. The said Vora does not deny that he is in the business of manufacturing and dealing in bearings and for about 23 years. He was also exporting goods to Russia. However, he has absolutely no connection with the exports and which have been the subject matter of the proceedings.

The transaction which was the subject matter of the adjudication proceedings has been set out in great details, but for the purpose of appreciating a limited argument we do not deem it necessary to refer to the same.

Suffice it to note that the appellant - Vora had claimed that he was not an active but a dormant Director in a company by the name M/s. Buttons RUS (India) Pvt. Ltd. He has claimed that there were certain transactions but eventually the appellant resigned as a Director at the end of accounting year 1999-2000. There were certain investigations in relation to the transactions but no show cause notice was issued by the Directorate of Revenue Intelligence (for short "DRI") against M/s. Buttons RUS (India) Pvt. Ltd. The officials of DRI, however, recorded statements of the appellant on 22nd and 23rd September, 1999, which came to be retracted later on. There was certain information received in the Directorate that one Radheshyam Exports Pvt. Ltd. and others were exporting readymade knitted garments through Nhava Sheva Customs House and claiming duty drawback by inflating its value and that is how search was carried out in the premises of the customs house agents, documents were seized, panchanamas were drawn and statements of various persons recorded. Even the statements of some of the persons, including the appellant, came to be retracted. Reliance is placed upon an affidavit dated 28th September, 1999 in that regard. There was a further statement recorded of the appellant by the said DRI on 30th August, 2000, where the appellant referred to his past dealings and business. There was also a letter sent by the appellant on 14th February, 2001, informing both the DRI and the Excise Department that he had retracted the statements. The Enforcement Directorate allegedly forced the appellant to give statements and which came to be at the behest of the officials exercising powers under the Foreign Exchange Regulation Act and Foreign Exchange Management Act. The appellant was arrested and produced in Court on 26th February, 2001, on which date he specifically retracted the statements made on 24th and 25th February, 2001. It is alleged that when the appellant was in Nashik Central prison, the DRI recorded further statements on 14th and 15th May, 2001. The DRI referred to the retraction dated 26th February, 2001, of the appellant in open Court and that is how the appellant contested the show cause notice dated 17th April, 2002, issued under section 124 of the Customs Act, 1962, inter-alia, calling upon the appellant and 14 others to show cause why their drawback should not be denied, why it should not be demanded under Rule 16A of the Customs and Central Excise Drawback Rules, 1995, the FOB value of the goods reported should not be redetermined and appropriate directions and orders be not made for imposing penalty.

The allegations in the show cause notice are that the appellant and Iqbal Mohan Amritlal Mehra have colluded and created front companies luring them with monetary gains. They have managed to open and float M/s. Radheshyam Exports Pvt. Ltd., Mumbai and several other companies. It was alleged that the appellant and the said Iqbal Mohan Amritlal Mehra controlled the activities of these companies and some firms. Thus incharge of these entities have acted at the behest and on the instructions of these two persons. Then, there are allegations made against the customs house agent and of misdeclaration of the value of the goods exported. That is how the appellant was proceeded against. We once again refrain from setting out these allegations in further details and equally the response of the appellant thereto.

It is alleged that after the two interim replies were given and the proceedings were conducted by the Adjudicating Authority, namely, Commissioner of Customs (Adjudication), Mumbai, he made an order dated 22nd January, 2008, whereunder he confirmed the demand of Rs. 1,65,63,082/- being the drawback taken by M/s. Radheshyam Exports Pvt. Ltd. by redetermining the value of the goods exported. He imposed redemption, fine and penalties on several persons, including on the appellant of Rs. 1 crore. Being aggrieved by this order dated 30th November, 2007, issued on 22nd January, 2008, the appellant and others preferred appeals and stay applications.

At the hearing of the stay applications the Tribunal was pleased to allow the appeals themselves and set aside the earlier adjudication order. The Tribunal remanded the matter by its final order dated 18th July, 2008. It is in pursuance of such direction of the Tribunal that the Adjudicating Authority heard all parties and passed an order styled as order-in-original dated 11th May, 2009. The Adjudicating Authority on this occasion held that the appellant''s acts have not resulted in the wrongful availment of drawback and, therefore, the charges levelled against him were liable to be dropped. The Adjudicating Authority thus dropped the proceedings against the appellant.

Thereafter, the matter was taken up for review by the Special Committee of Chief Commissioners and it decided to approach the Tribunal. There are certain other proceedings referred to, including a Public Interest Litigation instituted in this Court and the replies filed therein by the Enforcement Directorate but what is material for us is that the Tribunal in this second round allowed the Revenue appeals and imposed a penalty of Rs. 15 lakhs on the appellant. The Tribunal concluded that both the appellant and Shri Mehra have colluded with others and created front companies and allowed them to avail of these drawbacks. Therefore, penalties can be imposed upon them.

It is this order of the Tribunal which is challenged in this appeal.

Mr. Sridharan, learned senior counsel appearing in support of this appeal submits that the questions of law at pages 19 and 20 as formulated and worded in the paper-books are substantial questions of law. He would submit that the Tribunal has ignored the relevant material and reversed the finding of fact of the Adjudicating Authority. While reversing the finding of fact, the Tribunal has omitted from consideration several material events and developments. The Tribunal has not expressed any opinion on the findings of the Commissioner that it was not the appellant who had any connection with M/s. Radheshyam Exports Pvt. Ltd. In that regard, the Commissioner had referred to the specific statement in the cross-examination of one Sandeep Naik, Director of M/s. Radheshyam Exports Pvt. Ltd. He conceded that the appellant Vora had no connection with this company - M/s. Radheshyam Exports Pvt. Ltd. at the relevant time. Mr. Sridharan points out that all the statements were recorded but retracted and promptly. They were retracted at the first available opportunity. Some of the statements recorded by the DRI in Nashik Central Prison could not have been considered and admitted in evidence. Mr. Sridharan submits that even if any finding or conclusion can be based on a confession which is retracted still the confession and admission therein has to be corroborated by independent material. Such independent material is hopelessly lacking in this case. There is no document on record by which the Tribunal could have concluded that it is the appellant who had floated the company or that the intent along with others was to float companies and to gain or avail of the drawback benefits. In the circumstances, he would rely upon the questions of law formulated by the appellant to submit that the Tribunal''s order is vitiated. Mr. Sridharan would submit in all fairness that the Tribunal''s order is vitiated also because it is delivered much after the period specified viz. of four months. The conclusion of the hearing is on 15th May, 2013, but the order was pronounced on 26th September, 2013. Thus, there is a delay of four months and eleven days in delivering and pronouncing the order and which has resulted in the Tribunal missing out vital and important material. He would, therefore, submit that the appeal be allowed and the matter be remanded back to the Tribunal.

Mr. Jetly appearing for the Revenue on the other hand would submit that this appeal is nothing but an attempt at re-appreciation and reappraisal of the factual material on record. The Tribunal, however, has assigned cogent and satisfactory reasons for reversing the order of the Adjudicating Authority. Mr. Jetly submits that these are nothing but delaying tactics. The matter has been remitted back and on remand the appellant succeeded before the Commissioner. It is the Revenue which pointed out to the Tribunal that the retraction of statements will not in any manner assist parties like the appellant. The cross-examination of certain persons and read as a whole would reveal that both M/s. Radheshyam Exports Pvt. Ltd. and M/s. Specialist Exports did not receive any payment through the companies against whose letter of credit the exports were made. Thus, there was nothing to show that the export realisation was from genuine exports. The amounts by way of export remittance were received in cash. The drawback was transferred by M/s. Radheshyam Exports Pvt. Ltd. to the bank account of M/s. Specialist Exports, M/s. Noble Garments and M/s. Sun Apparels. Similarly, the drawback received by M/s. Specialist Exports was transferred to the accounts of some other entities. The exporters could not produce any evidence to show that they have made payment to the supplier of goods. Thus, one who has exported the goods ought to have been credited with the amounts received, including of drawback. That has not admittedly transpired. Mr. Jetly, therefore, relied upon paras 4.1.2 and 4.1.3 of the Tribunal order running pages 48 to 50 to urge that the appeal does not raise any substantial questions of law and it deserves to be dismissed. He would submit that no capital can be made of the delay which may have occurred on account of the Tribunal being required to peruse voluminous record and numerous documents. It is not that mere delay has, therefore, resulted in any vital or important material being omitted from consideration. In other words, the Tribunal order cannot be termed as perverse. The appeal, therefore, be dismissed.

With the consent of both advocates and from a perusal of the record, we find that the Tribunal''s order raises the following substantial question of law:

"Whether in the facts and circumstances of the case, the Appellate Tribunal was right in imposing penalty on the Appellant by ignoring the relevant material on record and relying upon irrelevant material?"

Considering the limited arguments, we dispose of this appeal finally. We would once again clarify that it is not necessary for us to refer to other allegations in the show cause notice in details or the responses thereto. We are further careful in clarifying that our order in this appeal is restricted to the case of the appellant - Vora as placed before the Adjudicating Authority and the Tribunal. Our reference to the case of Vora as set out in the pleadings before the Adjudicating Authority and the Tribunal, therefore, should not be construed as having accepted or rejected any version of either Vora or the other parties. The other parties not being appellants before us, we do not think that any reference is required to be made to their case. Similarly, the order and directions that we propose to pass would only enure to the benefit of the appellant and not the other parties in the adjudication proceedings and before the Tribunal. The Tribunal order to the extent of these parties is, therefore, not interfered with.

Suffice it to note that before the Commissioner viz. Adjudicating Authority, when all the materials were placed by both sides, he had not only the statements which were later on retracted but the response or replies of other noticees. We are rather surprised that the Adjudicating Authority and equally the Tribunal follows in all such cases as a routine, a pattern. The pattern being those noticees who were called upon to show cause filed their response and replies in writing. They rely upon certain documents which may be also relied by the Revenue and emanating from the Revenue''s record. The Tribunal as also the Adjudicating Authority in this case has proceeded on the footing that there is no denial of the existence of the documents or their contents. There is no dispute raised in that regard. Therefore, the Tribunal has permitted cross-examination of the noticees either by the department or by the co-noticees. We are mindful of the fact that in adjudication or such proceedings, strict rules of evidence or the law of evidence may not be applicable. However, what the principles of natural justice demand is that what is in evidence cannot be relied upon. What is evidence is something about which a party has given a writing in the form of an affidavit. Further, such party is then cross-examined by the opponent or the adversary against whom the statement or material is sought to be relied upon. If the veracity of this is tested in the cross-examination and the party withstands the same then alone the version as found in the affidavit or the recorded statement can be termed as evidence and accepted and relied upon by an Adjudicating Authority. (See Bareilly Electricity Supply Co. Ltd. Vs. The Workmen and Others, AIR 1972 SC 330 : (1972) LabIC 188 : (1971) 2 LLJ 407 : (1971) 2 SCC 617 : (1972) 1 SCR 241 . This salutary principle would govern even adjudication proceedings. We do not, therefore, know as to on what basis, even if all had consented, that the Adjudicating Authority and the Tribunal allowed co-noticees to cross-examine each other. Here also in this case and in the Memo of Appeal in the present matter, we find that the appellant has while disassociating himself completely from the transactions and the entities, sought to inculpate Mr. Mehra. Therefore, it is one version against the other. In such circumstances, the Tribunal as also the Commissioner would have been properly advised to chart a safe course and as is found in the above principles.

Be that as it may, what we find is that the Commissioner has referred to the materials as far as the present appellant is concerned. At para 44(i) running page internal page 67 of his order the Adjudicating Authority observes that the allegations against Kiran Nagindas Vora are that he entered into a conspiracy with Iqbal Mohan Amritlal Mehra to make fictitious export to Russia against repayment of state credits granted to erstwhile Soviet Union Republic (USSR) and colluded with others. He created front companies luring them with monetary gains and have managed to open and float M/s. Radheshyam Exports Pvt. Ltd., Mumbai and several other companies which have rendered themselves liable for confiscation under section 113(d) and 113(i) of the Customs Act, 1962. They have rendered themselves liable to penalty in terms of section 114(1) and/or 114(iii) of the Customs Act, 1962.

Kiran Nagindas Vora retracted his statements dated 22nd September, 1999 and 23rd September, 1999, by an affidavit dated 27th September, 1999, in the presence of the Magistrate. It was retracted at the first available opportunity and that he had already filed a copy of the retraction with his interim reply dated 22nd December, 2004. However, he filed it along with additional interim reply and he sent a registered AD letter to the DRI with his affidavit dated 14th February, 2001, which gave full particulars of his business activities, including Russian exports. He made a specific statement therein that the DRI and his officials coerced him to write a statement inculpating him. This affidavit, though received by the DRI, has not been rebutted.

Then, the Commissioner holds that the statements of Vora recorded at the Central Prison cannot take the case any further because the earlier statements have been specifically retracted. The retraction has not been termed as an after-thought nor it has been observed that the same is not honest and truthful. Apart therefrom and if any finding can be based on such retracted confession, the Commissioner found no independent corroborative material. He holds that even the co-noticees have not inculpated or involved Kiran Nagindas Vora. He referred to a cross-examination of one Sandeep Naik, Director of M/s. Radheshyam Exports Pvt. Ltd. recorded on 5th December, 2005, wherein he states that Kiran Vora was not involved in any activity of M/s. Radheshyam Exports Pvt. Ltd. Thus, when at the relevant time the association is not established that the Commissioner proceeds to conclude that even the principles laid down in the judgment of the Hon''ble Supreme Court in K.L. Pavunny vs. Assistant Collector (HQ), Central Excise Collectorate, Cochin would not be of any assistance. He holds that there is no corroboration forthcoming as far as the allegations against Vora are concerned. Based on this, he passes his ultimate order.

All this was before the Tribunal and rather the Tribunal was aware of the case of the appellant and Mehra. From paragraphs 5.1.1., the Tribunal at page 46 refers to the allegations, the transactions and the drawback. However, after being made aware of the findings of the Commissioner and referring them in para 4.1.2, we are not able to find any independent conclusion of the Tribunal. The Tribunal has not concluded that the Commissioner''s reasoning is either perverse or vitiated by any error of law apparent on the face of the record. If the statements made by Vora have been retracted and the Tribunal was inclined to proceed on the footing that retracted statements can be utilised by the Revenue, then, it was incumbent upon it to refer to the corroborative material. That the Tribunal does not find it necessary to refer to it in details is evidenced by virtue of its general and sweeping observations in para 4.1.3 of the order. If the cross-examination of Naik and the conclusion of the Commissioner (Adjudicating Authority) drawn therefrom is contrary to the overwhelming evidence on record, then, we do not find any reference to such evidence save and except the interim replies given to the show cause notice wherein the said Vora - appellant before us purports to deal with the allegations in the show cause notice on merits. We do not find the Tribunal referring to any independent corroborative material. If indeed there was any, it was the duty of the Tribunal to have expressly referred to it and relying upon the same, overturned the order of the Commissioner. Instead, the Tribunal makes reference to the general principle that retraction of statement and cross-examination of certain persons would not make any dent in the plethora of evidence produced by the Department and confessions of various persons. True that the same may be dealing with other appellants and their cases. Equally true it is that their appeals were, therefore, without any merit. However, it was the duty of the Tribunal to have referred to the specific allegations against the appellant allegedly floating fictitious companies and enabling them to avail of duty drawback benefit. Therefore, the duty of the Tribunal was to deal with specific allegations against the appellant, the response and the evidence in relation thereto. Based on the general evidence and against other appellants it could not be established before the Tribunal that the Commissioner has erred in taking a view that no penalties can be imposed on the said Vora. The Tribunal''s conclusion that in case of retraction of confessional statement can be ignored might be correct as a general statement of law but that inculpatory portion of retracted confession must be relied upon together with independent corroborative material. The same only cannot be then relied upon and to base any conclusion. Therefore, its further finding that a case cannot be demolished merely by cross-examination of witnesses by ignoring circumstances and corroborative evidence is equally vitiated because the cross-examination may contain admissions. The cross-examination may also have vital omissions and inconsistencies. If all this has to be ignored, then, there has to be overwhelming independent material. Nothing of all this has been referred to, much less in details. In these circumstances, we cannot agree with Mr. Jetly that the Tribunal''s order cannot be termed as perverse. We do not agree with him that this appeal is an attempt at reappreciation and reappraisal of the factual conclusions.

Once we hold as above, then it is evident that the Tribunal''s conclusions cannot be sustained. They are vitiated by errors of law apparent on the face of the record. They are perverse for the Tribunal omitted from consideration, not only the conclusions recorded by the Commissioner/Adjudicating Authority, but the material referred by him. His reasons are based on the statements in the cross-examination of Sandeep Naik and the failure of the Revenue to bring in independent corroborative material. In these circumstances, this appeal raises clearly substantial questions of law. We are of the opinion that the Tribunal''s order deserves to be quashed and set aside. The substantial question of law is answered in favour of the appellant and against the Revenue.

Thus, this appeal succeeds. The impugned order is quashed and set aside. Resultantly, the appeal of Mr. Kiran Nagindas Vora shall stand restored to the file of the Tribunal for a decision afresh on merits and in accordance with law. We clarify that we have not expressed any opinion on the rival contentions. Our reference and somewhat extensive to the allegations in the show cause notice, the stand of Mr. Kiran Nagindas Vora shall not be construed as any opinion of this Court in his favour. Equally, we do not hold that the Commissioner''s order is vitiated or perverse as alleged by the Revenue. All contentions of both sides are kept open. We further direct that while the Tribunal should decide the appeal afresh, it must ignore all its earlier conclusions. It must permit parties to advance contentions and rely upon the record.

The appeal succeeds accordingly. No order as to costs.