The penal action cannot be proposed on statement of co-accused unless corroborated by evidences.

Case:-M/S PAVITAR SINGH V/S COMMISSIONER OF CUSTOMS, AMRITSAR

Citation: - 2012-TIOL-1269-CESTAT-DEL

Brief Facts:- Alleight appeals are being disposed of by a common order as the issue involved in all of them is identical. Appeal No. 178, 179, 180/2008 arises out of order-in-original No.142-144/Cus/Appl/Ldh/2007 whereas appeal Nos. 181 to 185/2000 arise out of order in appeal No.145-149/Cus/LDH/07. Vide said orders, penalties imposed upon the appellant stand upheld by Commissioner (Appeals).
M/s. Megna Impex, 7 - Sehdev Market Jalandhar, exported certain goods under the claim of DEPB scheme. The goods were described in the 33 shipping bills as “crank shaft for high speed compressor” having DEPB credit of 14%. However investigations conducted by Anti Smuggling Wing of Customs (Prev) Commissionerate, Amritsar revealed that said description was changed/altered to the 'timing shaft for Mercedes truck' having DEPB credit of 22%, by substituting/swapping the documents. Whereas the duplicate copies of shipping bills and the other related documents available with the Customs at CFS, Ludhiana showed the description of export items as ‘timing shaft for mercedes truck’ and the other export promotion copy and DEPB of the shipping bills resumed from the office of Joint Director General of Foreign Trade, Ludhiana also contained the description as above. The copies of GRs submitted with the bank showed the description of goods as 'crank shaft for high speed compressor. During the course of investigation, statement of various persons was recorded. M/s. Magna Impex is the proprietorship concern in the name of Shri Satbir Singh. Shri Satbir Singh is a clerical employee of the appellant Pavitar Singh who is practicing Chartered Accountant. Based upon the revelation by Shri Satbir Singh, it came to light that Megna Impex was actually floated by Shri Ashok Kumar partner of M/s. ATM International, Shri Gurkirpal Singh, Director of M/s. Supreme Casting Ltd., Shri Pavitar Singh, Chartered Accountant and Shri Vijay Madaan, Proprietor of Ms. Speed Cargo Logistic Pvt. Ltd. under the proprietorship of Shri Satbir Singh, an employee of Shri Pavitar Singh. Accordingly, the residential premises of Gurkirpal, Ashok and Shri Pavitar Singh were put to search on 13/14. 2000 by officers of Anti Smuggling wing of Customs. Business premises of Shri Pavitar Singh was also put to search and files containing in DEPB application submitted to the office of Joint DGFT Ludhiana were recovered along with rubber stamp of M/s. Megna Impex Jalandhar.
Further, investigations were conducted from the banks and other relevant sources, based upon which Revenue entertained a view that fraudulent exports were being made by M/s. Megna Impex with an intent to avail excess DEPB benefits. Such DEPB scrips procured by M/s. Megna Impex on the basis of misrepresentation of wrongly described exports were further sold by them in the market and the buyers have imported duty free goods against such scrips. Revenue entertained a view that Shri Satbir Singh, proprietor of M/s. Megna Impex was only a front name for unlawful activities and the actual beneficiary were Shri Gurkirpal Singh, Shri Ashok Kumar and Pavitar Singh. Accordingly, proceedings were initiated against them resulting in imposition of penalties on the present appellant by the original adjudicating authority vide various order-in-originals. The said penalties imposed upon the appellants stand upheld by the Commissioner (Appeals). Thus, the assessee filed the present appeals.

Appellant’s contention:- The appellant submit that he is a practicing Chartered Accountant and it was in due course of his profession, he filed the application for I.E Code and other export related work, on behalf of M/s. Megna Impex. The submissions of various persons recorded during the course of investigation revealed that the said filing of applications of I.E code and for claiming DEPB scrips were in the ordinary course of his profession. He submits that only piece of evidence against his is the statement of Shri Ashok Kumar, wherein he deposed that unlawful income out of fraudulent export was to be shared between Shri Ashok Kumar and appellant in the ratio of 40%, 40% and 20%. He submits that apart from the said statement of Shri Ashok Kumar, there is nothing on record to implicate him. The statement of Shri Ashok Kumar being in the nature of statement of co-accused cannot be relied upon solely, without being their any evidence to that effect. As regards his employee, having no financial means to undertake huge exports, being the proprietor of export firm, i.e. M/s. Megna Impex, he submits that there is no evidence on record to show that he was a party to the creation of the said proprietary concern with intent to indulge in the clandestine activities. The entire evidence on record shows that it was Shri Ashok Kumar, Shri Gurkirpal Singh who connived with his employee to float the said concern and undertaken fraudulent exports. He submits that he was only engaged in the preparation of documents for DGFT as a qualified chartered accountant and in such a situation, he cannot be held responsible for aiding and abating the fraudulent export or claim other benefits so as to invoke penal action against him.
He draws attention to the prosecution order dated 9.12.03 passed by Commissioner of Customs, Amritsar and Second prosecution order against Shri M P Singh, Inspector Customs. It stands recorded in the said sanction order that Shri M P Singh was a party to criminal conspiracy with Shri A.K. Kaul, Superintendent/Appraiser, Customs FCS, OWPL, Ludhiana and Shri D.R. Ahuja, Superintendent with Shri Ashok Kumar, partner M/s. ATM International and Shri Gurkirpal Singh, Managing Director of Supreme Casting Ltd. and Shri Satbir Singh, proprietor of M/s. Megna Impex to commit criminal misconduct and to cheat the Government of India. He has recorded that M/s. Megna Impex which was a dummy firm floated by Shri Ashok Kumar and Shri Gurkirpal Singh and with Shri Satbir Singh as proprietor. As such, he submits that even while the prosecution order was passed, Commissioner has not found that he was a party to the said creation of dummy unit except the fact that the proprietor Shri Satbir Singh, who has floated the said dummy unit, was his employee.
He also made attention to the investigation conducted by CBI wherein a clean chit stand given to him. He also drawn attention to the assessment order dated 15.3.04 passed by Income Tax department of M/s. Megna Impex wherein it stands concluded that real beneficiary of the export proceeding were Shri Ashok Kumar, Shri Gurkirpal and Shri Satbir Singh. He submitted that the money deposited in the bank of the assessee was withdrawn by said two persons for their selfish motive.

Respondent’s Contention:-The respondent submit that as perthe statement of Shri Ashok Kumar, they exported grossly overvalued consignment of hand tools, which were overvalued to the extent of 250-300% and auto parts declared under the shipping bills was never exported by them though they have been mentioned the same in the shipping bills. Instead, they have exported hand tools with much lower value. All these were done with a motive to obtain unlawful gains. He further clarifies that all these actions were done with a motive. Shri Satbir Singh has been made the proprietor of the exporting firm so that whenever these acts are detected by any agency they should not be held responsible but only a small time employee of Shri Pavitar Singh is caught, being the proprietor of M/s. Megna Impex. Shri Ashok Kumar further clarified that profits from the said export were to be distributed between Shri Gurkirpal Singh, himself and Pavitar Singh in the ratio of 40%, 40% and 20%. He also detailed the modus operandi adopted by them for remitting the value of the exports from the banks accounts, receiving back the money through hawala operators in Dubai and getting the blank cheque books from Shri Satbir Singh, proprietor of M/s. Megna Impex, He also disclosed the details of his visit to Dubai and arranging the journey of Shri Satbir Singh to Dubai. He further offered to pay the DEPB benefit availed by him and Shri Gurkirpal Singh. He also disclosed the names of the buyers, who purchased fraudulently, obtained DEPB scrips.
They further submits that Shri Satbir Singh. Proprietor of M/s. Megna Impex is a low paid employee of Pavitar Singh and from the statement of Shri Ashok Kumar, it becomes clear that M/s. Megna Impex was floated as a dummy unit. The appellant played active role in floating and running of Megna Impex. He applied for IEC number and registration of Megna Impex with Engineering Export Promotion counsel. On receipt of export documents he applied for DEPB scrips. The above facts that he was engaged in the above activities stand accepted by Shri Pavitar Singh in his statement recorded on 13.12.2000. Shri Satbir Singh, proprietor of M/s. Megna Impex also confirmed about the facts regarding the role of the appellant, who has also deposed that he used to give blank signed cheque books to Shri Ashok Kumar and Gurkirpal Singh under the direction of Shri Pavitar Singh.
They submits that if it is presumed that appellant was one of the shareholder in illicit account of M/s. Megna Impex, he cannot escape penal action under the Customs Act for his act of abatement and his activities to defraud the govt. exchequer. He provided his office, his manpower and his professional services to his accomplish the act of fraud.
They also submit that reliance of the appellant on CBI investigation cannot advance his case inasmuch as the said investigations were not for violations under the Customs Act, 1962. If the CBI has not filed any charge sheet against the appellant, it does not exonerate him automatically for the action under the Customs Act, 1962.
Further they submit that his prosecution under section 132 and 135 of the Customs Act, 1962 is nothing but judicial proceedings in the court of Chief Judicial Magistrate Amritsar, which has no bearing and relevance to the present penal proceedings under the Customs Act. It was submitted that proceedings under the Customs Act 1962 are independent from the action taken by the income tax authorities. Merely because the income tax department has not taken any action against the appellant, the same does not grant him any immunity from the penal provisions of the Customs Act. Per se, they pray for rejecting the appeals.

Reasoning of Judgment: -The Hon’ble CESTAT held that Revenue's case is that M/s. Megna Impex was floated with one of his low paid employee as proprietor of the same. As per the statement of Shri Ashok Kumar, the appellant was also one of the beneficiaries to the illegal action, though the appellant has himself denied so. We proceed to discuss various evidence relied upon by the adjudicating authority as well as by appellate authority and the evidence placed on record by the appellants.
Strong reliance stand placed by the revenue on the statement of Shri Ashok Kumar, who had deposed that appellant was also a share holder in the illicit gains to the extent of 20%. Apart from Shri Ashok Kumar, no other person concerned with the case i.e. either Shri Gurkirpal Singh or Shri Satbir Singh has deposed to the effect that the appellant was to get 20% of the profit made by the firm. The appellants himself, in his statement recorded during the course of investigation has denied the fact of getting 20%. Admittedly, the said statement is in the nature of statement of co-accused and requires corroboration from independent sources. There being none, the said statement cannot be made sole basis for holding against the appellant.
They further held that various statement of Shri Satbir Singh recorded during the course of investigation only implicate Shri Ashok Kumar and Shri Gurkirpal Singh. As recorded in the impugned order, Shri Satbir Singh in his statement dated 13.12.2000 clearly deposed that all the consignments of M/s. Megna Impex were finalized and exported by Shri Ashok Kumar and Shri Gurkirpal Singh. It has also come on record that it was Shri Ashok Kumar who was managing all the affairs of the aforesaid firm M/s. Megna Impex. In his subsequent statement dated 16.4.2001, Shri Satbir Singh has deposed that Shri Ashok Kumar and Shri Gurkirpal Singh floated a firm in his name and they were actual beneficiary and both of them had knowledge about the business and financial position. The DEPB obtained by M/s. Megna Impex were being used/sold by Shri Ashok Kumar and Shri Gurkirpal Singh. The blank cheques were being issued by him and were being given to Shri Ashok Kumar and that he was putting his signatures on all export related documents at the instance of Shri Ashok Kumar. Similarly, in his statement recorded on 18.4.2001, Shri Satbir Singh deposed that he had given 3 to 4 blank cheque books duly signed by him to Shri Ashok Kumar and one blank cheque book and some loose cheques to Shri Gurkirpal Singh. There is no mention of the name of Shri Pavitar Singh in the said statement of Shri Satbir Singh except to the fact that he was an employee of Shri Pavitar Singh and Shri Pavitar Singh was engaged in the activity of getting I.E Code and export related documents.

Decision: - Appeals allowed.

Comment:- This is very important decision wherein the assessee was undertaking his normal course of business and only co-accused has named his involvement in fraudulently taking DEPB scripts. But these are also not supported by independent and cogent evidences. In light of this, the penalty against the appellant should be waived.

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