Harminder Singh Chadha v. Commissioner of Customs New Delhi

Delhi High Court · 20 Jul 2018 · 2018:DHC:4415-DB

S. RAVINDRA BHAT; A. K. CHAWLA

CUSAA 156/2018 & CUSAA 157/2018

2018:DHC:4415-DB

criminal appeal_dismissed Significant

AI Summary

The Delhi High Court upheld penalties against appellants for smuggling under the Customs Act, ruling that rejection of cross-examination requests was not a violation of natural justice given sufficient corroborative evidence.

Full Text

CUSAA 156/2018 & CUSSA 157/2018
HIGH COURT OF DELHI
Date of Decision: 20.07.2018

CUSAA 156/2018, CM APPL. 28246/2018
HARMINDER SINGH CHADHA ..... Appellant

VERSUS

COMMISSIONER OF CUSTOMS (PREVENTIVE) NEW DELHI ..... Respondent

CUSAA 157/2018, CM APPL. 28340/2018
INDERJIT SINGH ..... Appellant

VERSUS

COMMISSIONER OF CUSTOMS NEW DELHI..... Respondent
Present: Mr. Jayant K. Mehta, Mr. Punit D. Tyagi, Mr. Anush Raajan, Advs. for appellant.
Mr. Sanjeev Narula, SSC for Customs.
Mr. Manik Dogra, Adv. for R-2.

CORAM:

HON'BLE MR. JUSTICE S. RAVINDRA BHAT
HON'BLE MR. JUSTICE A. K. CHAWLA S. RAVINDRA BHAT, J. (ORAL)

JUDGMENT

1. These two appeals under Section 130 of the Customs Act, 1962 [hereafter “the Act”] challenged a common order of the Customs, Excise and Service Tax Appellate Tribunal [hereafter “CESTAT”] which confirmed an adverse order, made against the appellants. 2018:DHC:4415-DB

2. The facts are that on suspicion of mis-declaration and smuggling of contraband, the Customs authorities detained four containers, for which Bills of Entry (BOE) were filed on behalf of the one M/s. Shivani Industries. It was found that the containers were stuffed with cigarettes, radial tubeless tyres and premium brand foreign liquor. The BOEs were filed by Mr. Suman Kumar Jha, a G-Card holder for M/s. Rama Kant Sahu and the documents were apparently handed over to him by Mr. Malkiat Singh, proprietor of the importer (M/s. Shivani Industries). The involvement of one Mr. Inderjit Singh (the appellant in CUS.AA 157/2018) was also discerned. The goods were seized under Section 110 of the Act, and notices were issued to M/s. Shivani Industries, Mr. Malkiat Singh, Mr. Inderjit Singh and Mr. H.S. Chadha (the appellant in CUS.AA 156/2018). Show Cause Notices (SCNs) were issued to the said parties.

3. After detailed adjudication proceedings, demands in excess of `10 crores were confirmed against the noticee. Besides, personal penalties were also imposed upon various individuals, including the present appellants (Mr. H.S. Chadha and Mr. Inderjit Singh).

4. The investigations had inter alia led to the seizure of documents in the form of electronic/digital files found in the laptop of Mr. H.S. Chadha who used to deal with foreign tyre manufacturers. The other appellant - Mr. Inderjit Singh is alleged to have assisted Mr. Malkiat Singh in the said operations. The statements of all the concerned persons - Mr. Inderjit Singh, Mr. Malkiat Singh, Mr. H.S. Chadha and Mr. Suman Kumar Jha) were called. Based upon all these materials, the adjudicating authority, i.e. the Commissioner concluded that Mr. H.S. Chadha was the mastermind behind these operations. His initial disclaimer about any involvement with Mr. Malkiat Singh was disproved because he had assisted him in various business activities and in the course of business, he had admitted that he was a consultant to Mr. Malkiat Singh and also that he had previous business transactions with him. The appeals by Mr. H.S. Chadha and Mr. Inderjit Singh were rejected by the CESTAT which inter alia held as follows:

“11. Shri Pradeep Jain,Ld. Advocate represented

Shri Inderjeet Singh as well as Shri H S Chadha on

whom penalties have been imposed amounting to

Rs. 1 crore each under section 112 (a) of the

Customs Act. He submitted as follows:

i) With reference to the penalty on Shri Chadha he submitted that the reply submitted by Shri Chadha has not been considered by the adjudicating authority. ii) The investigation has not unearthed any evidence to connect Shri Chadha with Shri Malkit Singh, who is the Importer on record.

iii) He denied that Shri Chadha had any role in opening or controlling the firm M/s. Shivani lndustries. He also did not have any control over such firm.

12. With reference to penalty on Shri Inderjeet Singh, the Ld. Advocate submitted: i) The adjudicating authority has held that Shri Malkit Singh, proprietor of Shivani Industries was responsible for import of misdeclared goods and a penalty of Rs. 10 crore has already been imposed on him. Shri Inderjeet Singh has helped Shri Malkit Singh when he approached him for guidance. There is no evidence to show that Shri Inderjeet Singh has gained illegally by helping Shri Malkit Singh. ii) The department has failed to bring anything on record to substantiate the allegation that appellant has done any act which can render goods liable for confiscation under section 111 or has abetted the alleged act. Accordingly he prayed that penalties Imposed on Shri Chadha and Inderjeet Singh may be set aside.

13. During the course of Investigation, we find that the Department has seized the laptop and mobile phones of Shri H S Chadha and lnderjeet Singh at the Delhi Airport when they were caught in an attempt to smuggle gold into the country. Scrutiny of the data showed clear evidence of the goods such as cigarettes (with brand name), food supplements and other goods which were later found concealed in the containers for which bill of entry were filed by Shivani Industries. Further, during the course of Investigation; it has been established that Shri Malkit Singh, proprietor of Shivani Industries was only a pawn in the smuggling racket who opened an IEC code number at the behest of Shri Inderjeet Singh for monetary consideration of Rs.20,000/- per consignment. This fact stands established through statements recorded by the Department. Shri Inderjeet Singh was found actively involved in arranging an official address for Shivani Industries. He was also found to be the defacto importer arranging for CHA clearance, handling correspondence with shipping line, arranging forged indemnity bond, etc. The KYC documents were submitted to CHA by Inderjeet Singh. The above evidences clearly substantiate the role played by Shri Inderjeet Singh in the smuggling of goods. Consequently, we find no reason to interfere with -,the penalty imposed on him which is sustained.

14. The investigation by the Department has established that Shri H S Chadha was the mastermind behind the smuggling of goods. He was administratively and financially controlling and supervising the whole scheme of things right from obtaining the lEC In the name of Shivani Industries through Inderjeet Singh. He was found to be closely monitoring all developments in the act of smuggling. He also mislead the department by providing false credentials of the supplier firm in Dubai From the fact that the details of all smuggled goods were found in Shri Chadha's computerized by the officials and also the fact that photos of the smuggled goods were taken with his mobile phone clearly proves that he was actively involved in the outright smuggling of goods for which Shivani Industries was the front. In the facts and circumstances of the case as discussed above, we find no reason to interfere with the penalty imposed on Shri H S Chadha”.

5. Mr. Jayant K. Mehta, learned counsel for the appellant (Mr. H.S. Chadha) argued that the testimony of Mr. Malkiat Singh to the extent it was adverse to Mr. H.S. Chadha, could not be used by the Revenue without providing cross-examination. He relied upon the portions of the adjudicatory authority’s orders to say that the written reply (in para 56) had expressly sought to cross-examine Mr. Malkiat Singh, a material witness and as it turned out, whose statement ultimately incriminated him and resulted in imposition of penalty. Furthermore, it was urged that apart from the statements and so-called material seized from Mr. Chadha, no link could be established in any credible manner between him and the alleged smuggling of contraband. Learned counsel, therefore, urged that the Court should interfere with the order of the CESTAT.

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6. Mr. Anush Raajan, learned counsel for the appellant and the other appellant - Mr. Inderjit Singh submitted that he was a low paid employee and he had no knowledge of the smuggling activities given that whatever he did was at the behest of Mr. H.S. Chadha. The imposition of penalty to the tune of `1 crore was disproportionate.

7. The Commissioner who considered the request for crossexamination, stated as follows in the order-in-original while rejecting it:

“64. Cross-examination of Sh. Suman Jha and Sh. Inderjcet Singh sought by Sh. Tarun Chawla, Advocate for M/s Shivani Industries, Noticee No.1 and its proprietor Sh. Malkiat Singh, Noticee No.4 has been rejected as the whole case is not merely based on the statements of Sh. Suman Jha and Sh. Inderjeet Singh but on other corroborative evidences specially in the form of documents, computer records recovered from various premises. Request for supply of unspecified non- relied upon documents has also been rejected as the same is absurd. Sh. Tarun Chawla, Advocate was informed vide letter of even no. 11131 dated 05.09.2016 to submit the final reply by 16.09.2016, failing which the matter would be decided without further reference to him or his client. Rejection of his request for cross-examination and supply of unspecified non-relied upon documents had also been communicated through the letter dated 05.09.2016. No response has been received so far in this regard. 64.2 Request of cross-examination of Sh. Malkiat Singh; Sh. Inderjit Singh; and of authorized person of Shipping Line sought by Sh. H.S. Chadha is also

rejected on the grounds as discussed in the preceding para.”

8. While discussing the case against Mr. H.S. Chadha, the order-in-original summarized the incriminating material apart from the statements recorded by Mr. Malkiat Singh and Mr. Inderjit Singh as follows: “67.[4] Sh. Harminder Singh Chadha, the mastermind behind the outright smuggling through Mis Shivani Industries: As per the mails retrieved from the laptop/mobile of Sh. H.S. Chadha and Sh. Inderjit Singh, M/s. Shivani Industries was the brainchild of Sh. H.S. Chadha who was administratively and financially controlling and supervising the whole scheme of things right from the obtaining of the JCE through Sh. Inderjit Singh. The word "new company" (referred for M/s. Shivani Industries) as picked up from the mails of Sh. H.S. Chadha exchanged between him and Sh. lnderjit Singh establishes that he was closely monitoring all the developments regarding procurement of the IEC like arranging an official address in Kundi for M/s. Shivani Industries; according his sanction for rent/security of the said. premises in Kundli; step by step information for applying of TIN NO., IEC Code no. and arranging CHA for clearance etc. He also misled the Department in proving false information regarding the credentials of the supplier firm. On being confronted during his statement dated 16.07.2014 that while K. Fortune General Trading LLC, is shown as having PO Box 22384, phone 2731607 (on search engine Google) which does not match with address of K. Fortune General Trading LLC, PO Box 172884, Dubai as given in his Bill of Ladings, and being told that instead PO Box 172884, Dubai is shown In the name of NTH International Llc, Dubai, UAE, &PO Box 17284, Dubai, UAE is shown in the name of Red Tailors Ajman, Ajman Tel+971 67465490 and thus told that M/s K. Fortune General Trading Llc, PO Box 172884, Dubai exists merely on paper, he stated that it was not true while the Overseas Enquiry report received from DRI clearly confirms the view that M/s K. Fortune General Trading Llc, did not exist at the said address and he was thus using forged invoices/PL etc.. Mail dated 28.04.2014 exchanged between Sh. H.S. Chadha and Sh. Inderjit Singh regarding K.Fortune Rubber Stamp confirms and validates his role and involvement as mastermind in the whole scheme of affairs. 67.4.[2] Scrutiny of the data retrieved from the mobile phone of Sh. H.S Chadha showed photo of goods i.e food supplements, Cigarettes Mond, Gaudang Garam etc. imported by M/s Shivani Industries which were later seized by the Department on 27.06.2014. On being confronted with the said photos Sh. H.S. Chadha in his statement recorded on 25.08.2014 confirmed that these photos were taken from his mobile. It clearly proves 'that he had active knowledge of outright smuggling and the contents being imported in M/s Shivani Industries in the name of Sh. Malkiat Singh. 67.4.[3] Sh. H.S. Chadha is a regular offender and has been defrauding the exchequer by indulging in smuggling activities. Just a few weeks before 'interception of smuggling in respect of M/s Shivani Industries, he was reportedly arrested for illegally carrying gold' of 8 Kgs, (Approx.) when he arrived' from Dubai on 07.06.2014 alongwith Sh. Inderjit Singh who was also caught with approximately

7.50 Kgs of gold at the IGI Airport, New Delhi. The above fact has been admitted by Sh. Inderjit Singh in his statement recorded on 24.07.14. In this Case also, the investigation proved that the gold however belonged to Mr. Harminder Singh Chadha. Sh. Inderjit Singh was entirely helping him. 'The foreign trip of Sh. Inderjit Singh was entirely financed by Mr. Harminder Singh Chadha. 67.4.[4] From the above it is proved beyond doubt that Sh. Harminder Singh Chadha was the mastermind of the whole scheme of the affairs who was knowingly indulging in evasion of duty by outright smuggling by providing invoices through his 'source K. Fortune General Trading LLc, Dubai, whose very existence is suspect and gross concealment of the goods in the containers in the name of Mr. Malkiat Singh, who does not possess the requisite educational background nor financial capacity or the business experience for this kind of business. It emerged that he was an importer only on paper and being controlled and manipulated by Shri Harminder Singh Chadha. 67.[5] The Imports made by Shri Malkiat Singh (Proprietor M/s Shivani Industries) in active collaboration with Shri Inderjit Singh and mastermind Shri Harrninder Singh Chadha are found to be liable for confiscation under Section 1J 1 (d), (f), (i), (I) and (m) of the Customs Act, 1962 and are punishable under Section 132 and 135 of the Act ibid. Sh, H.S. Chadha thus besides Sh. Malkiat Singh and Sh. Inderjit Singh is also found liable to penal action under Section 112 (a) of the Act.”

9. Having regard to the above circumstances, this Court is of the opinion that the CESTAT’s finding that there was no infirmity with the order-in-original, is not unreasonable. In the present case, the Revenue did not rely merely upon the statement of Mr. Malkiat Singh – who later claimed, was a mere lender and had no substantial means – but also upon other material, including crucial evidence seized from the premises of Mr. H.S. Chadha. This Court had the occasion to consider Mr. Chadha’s appeal to the CESTAT which did not deny his foreknowledge of Mr. Malkiat Singh. In the appeal he merely stated that he acted as a consultant. If those facts are taken into account, the emails (especially the email dated 28.04.2014 between Sh. H.S. Chadha and Sh. Inderjt Singh regarding K- Fortune General Trade LLC) exchanged with the foreign suppliers, pose more questions. In these circumstances, the plaintiff’s request for cross-examination and its rejection by the Revenue cannot be characterized as violation of principles of natural justice.

10. As far as the appeal of Mr. Inderjit Singh is concerned, the Court is of the opinion that his involvement in the whole operation was also with knowledge. The fact that he was an employee of Mr. H.S. Chadha, in the opinion of the Court, does not in any manner absolve him of having contravened provisions of law which attracted penalty. Given that Section 112 of the Act, prescribed an outer limit of penalty amount equivalent to duty (which in this case amounted to over `10 crores), the imposition of penalty at the rate of `1 crore cannot be considered disproportionate.

11. No question of law arise in the appeals; they are consequently dismissed.

S. RAVINDRA BHAT, J

A. K. CHAWLA, J

JULY 20, 2018

Harminder Singh Chadha v. Commissioner of Customs New Delhi

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