Directorate Of Enforcement vs A.K. Mittal
2014 Latest Caselaw 860 Del

*       IN THE HIGH COURT OF DELHI AT NEW DELHI
                                                     Reserved on: 11.02.2014
%                                                Date of Decision: 17.02.2014
+                                 CRL.A. 352 of 2010

DIRECTORATE OF ENFORCEMENT             ..... Appellant
             Through: Mr. Subhash Bansal, Adv.

                                        versus

A.K. MITTAL                                             ..... Respondent
                         Through:      Mr. Vivek Sibal & Mr. Jitender Ratta,
                                       Advs.

+                 CRL.A. 353 of 2010
DIRECTORATE OF ENFORCEMENT             ..... Appellant
             Through: Mr. Subhash Bansal, Adv.

                                        versus

RAJASTHAN PETRO SYNTHETICS LTD.        ..... Respondent
             Through: Mr. Vivek Sibal & Mr. Jitender Ratta,
                      Advs.
+                 CRL.A. 354 of 2010
DIRECTORATE OF ENFORCEMENT             ..... Appellant
             Through: Mr. Subhash Bansal, Adv.
                       Versus

G.P. PODDAR                                             ..... Respondent
                         Through:      Mr. Vivek Sibal & Mr. Jitender Ratta,
                                       Advs.
CORAM:
HON‟BLE MR. JUSTICE V.K.JAIN

                                    JUDGEMENT

V.K.JAIN, J.

A memorandum dated 22.3.2002, was issued by the Special

Director, Enforcement Directorate, to the reskpondents, Rajasthan Petro

Synthetics Ltd. (hereinafter referred to as „the Company‟), Mr. G.P.

Poddar, Managing Director of the Company, Mr. A.K. Mittal, Executive

Director of the Company and Mr. B.B. Verma, Manager of the

Company, alleging therein that during 1985-1988 they had imported

pigment preparations and not PP Dyed Chips which was the import item

declared by the Company and the price for the said import were

negotiated by Mr. G.P. Poddar and Mr. A.K. Mittal. Reference in this

regard was made to the statement made by Mr. B.B. Verma on several

dates under Section 40 of the Foreign Exchange Regulation Act, 1973

(hereinafter referred to as „the Act‟). Alleging contravention of Section

8(3)(4) of the Act and also alleging that S/Shri G.P. Poddar, A.K. Mittal

and B.B. Verma were the persons responsible/supervisor/in-charge of

the Company for conduct of its business at the relevant time when the

import was made, they were required to show cause as to why

adjudication proceedings as contemplated in Section 51 of the Act

should not be held against them, for the aforesaid contravention.

2. Vide order dated 26.10.2006, the Special Director of

Enforcement, holding them guilty of contravention of Section 8(3) &

8(4) read with Section 68(1)&(2) of the Act, imposed penalty of Rs.8.00

lakh upon the Company, Rs.2.00 lakh each on Mr. G.P. Poddar and Mr.

A.K. Mittal and Rs.50,000/- on Mr. B.B. Verma.

3. While imposing penalty, the Special Director inter alia took note

of the fact that Mr. G.P. Poddar, Managing Director of the Company in

his statement dated 18.11.1993 had stated that they had placed order for

import of P.P. Dyed Chips during the period Mr. A.K. Mittal was the

General Manager and Mr. B.B. Verma was the Manager (Imports) and

as per the procedure Mr. Mittal was the person to approve the purchase

bill though wherever required he used to consult his superiors such as

another Director, Mr. Kedia or the Managing Director, Mr. G.P. Poddar.

In the said statement, Mr. Poddar had also stated that P.P. Dyed Chips

were virgin P.P. Polymers (major component) and pigment (minor

component). It was further stated by Mr. Poddar in the aforesaid

statement that the prices of pigment preparation could be higher than

that of P.P. Dyed Chips though and in the opinion of Mr. Poddar P.P.

Dyed Chips and PP Chips should be classified under same tariff, though

he had no idea of pigment preparation.

4. The Special Director also took note of the statement of Mr. B.B.

Verma who inter alia stated that when imported goods were examined

by the Customs Authorities, the contents of the consignment were found

to be pigment preparations instead of P.P. Dyed Chips. In the opinion

of Mr. Verma, the rates of pigment preparations and P.P. Dyed Chips

could be different. Mr. Verma further stated that as far as his memory

goes the material imported by the Company was pigment preparation

whereas as per the order B/Es is the material imported had been shown

as P.P. Dyed Chips.

5. The Special Director of Enforcement also noted that the Customs

Authorities had found that the consignment contained pigment

preparations instead of P.P. Dyed Chips as declared by the importer and

that the cost of P.P. Dyed Chips was less than that of the pigment

preparation. He also noted that the order passed by the Customs

Authorities was confirmed by CEGAT and the Special Leave Petition

against this order was dismissed by the Hon‟ble Supreme Court vide its

order dated 31.10.2001.

6. The order passed by the Special Director of Enforcement was

challenged before the Appellate Tribunal for Foreign Exchange

(hereinafter referred to as „the Tribunal‟). Initially the appeal was heard

by a Bench consisting of the Chairperson Shri O.P. Nahar and Member

Kumari Vijayalakshmi. Shri O.P. Nahar vide his order dated 11.7.2007

quashed the order passed by the Special Directorate of Enforcement

whereas Kumari Vijayalakshmi upheld the said order. As a result the

matter was referred to another Member Shri R.N. Poddar, for his

decision on the following points of disagreement between Shri O.P.

Nahar and Kumari Vijayalakshmi:

"i. Whether the appellants did not use the foreign exchange for the

declared purpose of importing P.P. Dyed Chips as required under

Section 8(3) and 8(4) of the Foreign Exchange Regulation Act and that

goods imported were of kind and quality etc. different from that

specified by them at the time of acquisition of foreign exchange?

ii. Whether the appellants had misdeclared the goods and imported

pigment preparation/organic master batches as against P.P. Dyed Chips.

If so, its effects?

iii. The order of the Customs Authority dated January 24, 1991

holding the appellant guilty was confirmed by CEGAT holding that the

manufacturers literature and other relevant information regarding the

nature and composition of imported goods were suppressed deliberately

and suppliers were asked by the importer not to indicate the correct

description and classification of the goods. Whether these which was

ultimately confirmed by the Supreme Court which finding are binding

on the appellants as well as on this Tribunal. If so, its effects?

iv. Whether the appellants have rightly been held guilty by the

Adjudicating Officer and impugned order is liable to be confirmed?"

Vide order dated 8.6.2009, Shri R.N. Poddar decided against the

appellant and in favour of the respondents. Being aggrieved, the

Directorate of Enforcement is before this Court by way of this statutory

appeal.

7. Sub-sections (3) & (4) of Section 8 of the Act read as under:

"8. Restrictions on dealing in foreign exchange.

(3) Where any foreign exchange is acquired by any person, other than an authorised dealer or a money- changer, for any particular purpose, or where any person has been permitted conditionally to acquire foreign exchange, the said person shall not use the foreign exchange so acquired otherwise than for that purpose or, as the case may be, fail to comply with any condition to which the permission granted to him is subject, and where any foreign exchange so acquired cannot be so used or the conditions cannot be complied with, the said person shall, within a period of thirty days from the date on which he comes to know that such foreign exchange cannot be so used or the conditions cannot be complied with, sell the foreign exchange to an authorised dealer or to a money- changer.

(4) For the avoidance of doubt, it is hereby declared that where a person acquires foreign exchange for sending or bringing into India any goods but sends or brings no such goods or does not send or bring goods of a value representing the foreign exchange acquired, within a reasonable time, or sends or brings any goods of a kind, quality or quantity different from that specified by him at the time of acquisition of the foreign exchange, such person shall, unless the contrary is proved, be presumed not to have been able to use the foreign exchange for the purpose for which he acquired it or, as the case may be, to

have used the foreign exchange so acquired otherwise than for the purposes for which it was acquired."

8. It is an admitted case that the respondent-Company had acquired

foreign exchange for importing P.P. Dyed Chips. This was expressly

admitted by Mr. B.B. Verma in his statement recorded under Section 40

of the Act. Mr. G.P. Poddar also admitted this fact, in his statement.

The order dated 8.6.2009, passed by Mr. R.N. Poddar, inter alia, reads

as under:

"2. The admitted facts without any controversy are that appellant company imported 39 consignments of goods in the years 1985-88 from Italy and France after obtaining few remittances of foreign exchange equivalent to Rs.87,58,617/- of pigment preparation which otherwise were declared as PP Dyed Chips...."

It would, thus, be seen that the respondents never disputed the fact

that the foreign exchange was obtained for import of PP Dyed Chips and

the same was the declaration made by them while importing the goods.

In other words this was not the case of the respondents before the

Tribunal nor is it their case before this Court that they had obtained

foreign exchange for import of pigment preparation or that in the

declaration submitted by the Company the goods being imported by it

were declared to be pigment preparation.

9. A perusal of the order passed by the Special Director of

Enforcement would show that Mr. B.B. Verma had expressly admitted

in his statement that the goods imported by the Company were pigment

preparations. He had also admitted that the price of pigment preparation

could be higher than the price of PP Dyed Chips. Even Mr. G.P. Poddar,

in his statement had admitted that the price of pigment preparations

could be higher than that of PP Dyed Chips. This was not the case

pleaded by Mr. B.B. Verma in his statement, that pigment preparations

and PP Dyed Chips were one and the same product. When the appeal

was argued before Shri R.N. Poddar, it was admitted by the respondents

that the goods imported by them were pigment preparations. Thus, there

can be no dispute that the product imported by the respondents was

pigment preparation which they had declared as PP Dyed Chips.

10. During the course of hearing before the Special Director of

Enforcement, the respondents did not place any material on record

which would show that PP Dyed Chips and pigment preparation are one

and the same product. No such material was placed before the Tribunal

during the course of several hearings before it. Even before this Court

no material has been placed on record which would show that pigment

preparation and PP Dyed Chips are one and the same product.

11. It was contended by the learned counsel for the respondents that

the onus was upon the appellants to prove that the foreign exchange was

used by the respondents for a purpose other than that for which it was

acquired and also that the goods imported by them were of a kind

different from that specified at the time of acquisition of foreign

exchange, but, no evidence was gathered by the Special Director of

Enforcement which would show that the goods imported by the

respondents were different from the goods for which foreign exchange

was acquired or the imported goods were of a different kind from what

was declared at the time of acquisition of foreign exchange. It was also

pointed out that even the declaration submitted by the respondents at the

time of acquiring foreign exchange was not placed on record.

12. There can be no quarrel with the legal proposition that it is for the

Enforcement Directorate, to gather evidence which would show that the

foreign exchange was used for a purpose other than for which it was

acquired and/or that the goods actually imported were of a kind different

from that was specified at the time of acquisition. But, in the present

case, such material is available on record in the form of the statement

made by Mr. B.B. Verma who clearly admitted that the goods declared

by them at the time of import were PP Dyed Chips, whereas the goods

actually imported by them were pigment preparation.

In Naresh J. Sukhawani Vs. Union of India 1996 SCC (Crl.) 76,

the Additional Collector of Customs imposed the penalty of Rs.1.00 lakh

upon the appellant relying upon the statement made under Section 108

of the Customs Act by his accomplice Mr. Subhash Dudani. The order

of penalty having been upheld by the High Court, the appellant

approached the Apex Court and contended that the statement of the co-

accused could be used only to corroborate other evidence as one of the

circumstances under Section 30 of the Evidence Act but cannot be used

as substantive evidence without corroboration from other independent

evidence. It was also submitted that except the statement of Mr. Dudani

there was no other independent evidence against the appellant.

Rejecting the contention, the Apex Court inter alia held as under:

"It must be remembered that the statement made before the Customs officials is not a statement recorded under Section 161 of the Criminal Procedure Code, 1973. Therefore, it is a material piece of evidence collected by Customs officials under Section 108 of the Customs Act. That material incriminates the petitioner inculpating him in the contravention of the provisions of the Customs Act. The material can certainly be used to connect the petitioner in the contravention inasmuch as Mr. Dudani's statement clearly inculpates not only himself but also the petitioner. It can, therefore, be used as substantive evidence connecting the petitioner with the contravention by exporting foreign currency out of India. Therefore, we do not think that

there is any illegality in the order of confiscation of foreign currency and imposition of penalty. There is no ground warranting reduction of fine."

As noted earlier when the matter was heard before Shri R.N.

Poddar, it was an admitted position of the parties that the goods

imported by the respondents were pigment preparations whereas they

were declared to be PP Dyed Chips. In these circumstances when the

description given at the time of acquiring foreign exchange as well as in

the import documents did not match the description of the goods actually

imported by the respondents, the onus would be upon the importer to

satisfy the Directorate of Enforcement that despite difference in the

description of goods, in fact they are one and the same goods. No such

material, however, was placed by the respondents either before the

Enforcement Directorate or before the Tribunal.

13. PP Dyed Chips are nothing but Polypropylene chips which have

been died, whereas pigment preparations from the name of the product

appear to be pigments which can be used for dyeing certain goods

including polypropylene chips. The Collector of Customs also had noted

that as per the manufacturers literatures the pigment preparations are to

be used to impart colour and is mixed with normal propylene in certain

ratios before the polypropylene yarn is drawn. Even Mr. G.P. Poddar

stated that PP Dyed Chips are virgin PP Polymers (major component)

and pigments (minor component). When the polypropylene chips are

treated with dyes they become Dyed PP Chips. A perusal of the order

passed by the Collector of Customs on 24.1.1991 which was later upheld

by CEGAT as well as by the Hon‟ble Supreme Court would show that

the price of PP Dyed Chips is about three times the normal price of

polypropylene and it varies according to the colour. In other words, the

price is dependent on the colourant rather than the base material, i.e.,

polypropylene chips. Therefore, it would be difficult to dispute that

pigment preparations are a product altogether different from PP Dyed

Chips. Pigment preparations, it appears to me are the colouring

substance whereas PP Dyed Chips are polypropylene chips which have

been subjected to dyeing using a colouring substance for the purpose.

Had PP Dyed Chips and pigment preparation being one and the same

product there could be no reason for the respondents to place order for

PP Dyed Chips instead of pigment preparations.

14. Section 68 of the Act to the extent it is relevant provides that

where a person committing a contravention of the provisions of the Act

is a Company, every person who at the time the contravention was

committed was in-charge of and responsible to the Company for the

conduct of the business of the Company as well as the Company shall be

deemed to be guilty of the contravention and shall be liable to be

proceeded against and punished accordingly. Admittedly, Mr. G.P.

Poddar was the Managing Director of the Company. Therefore, it can

hardly be disputed that being the Managing Director he was a person in-

charge of and responsible to the Company. In K.K. Ahuja vs. V.K. Vora

[2009 (3) JCC (NI) 194], the Hon‟ble Supreme Court, inter alia, held as

under:

"(i) If the accused is the Managing Director or a Joint Managing Director, it is not necessary to make an averment in the complaint that he is in charge of, and is responsible to the company, for the conduct of the business of the company. It is sufficient if an averment is made that the accused was the Managing Director or Joint Managing Director at the relevant time. This is because the prefix `Managing' to the word `Director' makes it clear that they were in charge of and are responsible to the company, for the conduct of the business of the company.

15. As far as the appellant Mr. A.K. Mittal is concerned, I find that

none other than Mr. G.P. Poddar stated that the deal for import of goods

in question was finalised by Mr. Mittal who was the person to approve

the purchase deals, though he would consult him or another Director Mr.

O.P. Kedia subject to their availability. Mr. B.B. Verma clearly stated

that the prices of goods in question were mainly negotiated by Mr.

Poddar and Mr. Mittal across the table usually in Europe. He further

stated that in 1988 the price of PP Dyed Chips were negotiated by Mr.

G.P. Poddar and Mr. A.K. Mittal with the foreign suppliers mostly in

West Europe. It is, therefore, evident from their statement that Mr. A.K.

Mittal was also the person in-charge of and responsible to the Company

for conduct of its business as far as import of goods in question was

concerned. Therefore, the penalty has rightly been imposed upon Mr.

G.P. Poddar and Mr. A.K. Mittal.

16. The foreign exchange utilised by the respondents for importing PP

Dyed Chips was to the extent of Rs.87,58,617/-. Considering the value

of the goods imported by them, neither penalty imposed upon the

Company nor the penalty imposed on its Managing Director, Mr. G.P.

Poddar and the Executive Director Mr. A.K. MIttal can be said to be

excessive. If at all, the penalty imposed upon them was on the lower

side. Therefore, there is no scope for reducing the penalty.

For the reasons stated hereinabove, the appeals are hereby allowed

and the impugned orders, passed by the Tribunal, are set aside.

LCR be sent back, with a copy of this order.

FEBRUARY 17, 2014                                         V.K. JAIN, J.
b'nesh