WP(C) Nos.2228/2008 & 8243/2008 Page 1 of 23 IN THE HIGH COURT OF DELHI AT NEW DELHI W.P.(C) No. 2228 of 2008 Reserved on: 13th January 2010 Decision on : 03rd March 2010 NAVSHAKTI INDUSTRIES P.LTD. & ANR. ..... Petitioner Through: Mr. T.P.S. Kang, Advocate. versus COMMISSIONER OF CUSTOMS & ORS. ..... Respondents Through: Mr. Mukesh Anand, Advocate for R-1. Mr. Satish Aggarwala with Ms. Hrishika Pandit, Advocates for R-2 & R-3. W.P.(C) No. 8243 of 2008 PRADEEP KUMAR ..... Petitioner Through: Mr. T.P.S. Kang, Advocate. versus COMMISSIONER OF CUSTOMS & ORS. ..... Respondents Through: Mr. Mukesh Anand, Advocate for R-1. Mr. Satish Aggarwala with Ms Hrishika Pandit, Advocates for R-2 & R-3. CORAM: JUSTICE S. MURALIDHAR 1. Whether reporters of the local newspapers be allowed to see the judgment? No 2.To be referred to the Reporter or not? Yes 3. Whether the judgment should be reported in the Digest? Yes JUDGMENT 1. Writ Petition (Civil) No.2228 of 2008 by Navshakti Industries Pvt. Ltd. (NIPL) seeks a direction to the Respondents to release on an urgent basis the consignments lying in the godowns situated at Khasra No.421, Village Hiran Kudna, Rohtak Road, Delhi and 11/16, Kavita Colony, Nangloi, Delhi after WP(C) Nos.2228/2008 & 8243/2008 Page 2 of 23 taking a bond. 2. Writ Petition (Civil) No. 8243 of 2008 is by Mr. Pradeep Kumar, the Proprietor of Rakesh Paper Company (RPC) for a direction to the Respondents to release the consignments of the Petitioner lying at the godowns situated in Khasra No.421, Village Hiran Kudna, Rohtak Road, Nangloi, Delhi without any preconditions. 3. NIPL is an importer of newsprint and facilitator of newspaper/magazines. It is also an importer and indenting agent for certain consignments of Light Weight Coated Paper (LWC), GNP and SNP papers on behalf of the RNI registered publishers as per their entitlements and requirements for printing of newspaper. Mr. Praveen Goel, s/o Mr. K.C. Goel is a Director of NIPL and Petitioner No.2 in Writ Petition (Civil) No.2228 of 2008. 4. As far as Mr. Pradeep Kumar, the Sole Proprietor of RPC [Petitioner in W.P.(C) No. 8243 of 2008] is concerned, he was an earlier importer of newsprint, who states that he has now stopped dealing in import of goods for almost last seven years. 5. On 22nd December 2006, a show cause notice was issued by the Directorate of Intelligence (DRI) stating that it had received intelligence that some unscrupulous importers of Paper and Paper Board (falling under Chapter WP(C) Nos.2228/2008 & 8243/2008 Page 3 of 23 Heading No.48 of Customs Tariff) were evading customs duty by way of misdeclaration of the description of the imported goods and undervaluing the same, in connivance with various holders of certificates issued by the Registrar of Newspapers in India (hereinafter referred to as `the RNI‟). The intelligence also indicated the violation of the actual user condition specified in the ITC (HS) & Customs Notification No.21/2002 dated 1st March 2002 in respect of import of newsprint & LWC paper, these traders were diverting goods to the local market instead of using them for printing of newspapers and magazines as per the provisions of the Exim Policy and Customs Notification. 6. It was pointed out that the effective rate of Customs duty on import of LWC paper up to 70 GSM was 5% and nil rate of counter-veiling duty (CVD) as per Notification Nos. 21/2002-CUS dated 1st March 2002 as amended and Notification No.6/2002/CE dated 1st March 2002. These rates were subject to actual user condition for printing magazines. Pursuant to the intelligence gathered, the residential and office premises of three major traders were searched on 28th December 2005. These included M/s Newsprint Trading Corporation Pvt. Ltd. (NPTC) of Mr. Prakash Garg; the residential premises of Mr. Prakash Garg; the office premises of Mr. Utpal Gupta, Director of M/s Allied Freight System Pvt. Ltd. (AFS) as well as his residential premises and the office-cum-godown premises of M/s Vijay Enterprises. The searches led to the recovery of several incriminating documents including blank signed cheque-books of various RNI holders, rubber stamps of various RNI holders, the blank signed cheque books of Qaumi Patrika, Qaumi Shaheed and M/s Sankalp Times along with CPUs and the laptops. WP(C) Nos.2228/2008 & 8243/2008 Page 4 of 23 7. In a statement recorded under Section 108 of the Customs Act, 1962 (Act) on 28th December 2005 Mr. Prakash Garg stated that besides the NPTC he was running Vijay Enterprises and Salwan International Pvt. Ltd. (SIPL) and that he was looking after the affairs of the said firms as General Manager. AFS was the Customs Handling Agent (CHA) for his three companies. For the imports made by his three companies, Mr. Prakash Garg used to file Bills of Entries in the name of RNI holders. All the imports were through the International Container Depot at Tughlakabad, New Delhi. The import consignments after customs clearance used to be offloaded in these four godowns situated near Palla More, Alipur, Delhi from where he used to sell the imported newsprint to different parties. Mr. Garg stated that in the invoice raised by the overseas supplier, the description of the imported paper used to be mentioned as paper roll. The invoice used to be scanned and then description would be changed as newspaper paper roll, and thereafter filed before the customs authorities. The modus operandi was that the description in the Bill of Lading would not be changed but only in the Bill of Entry. A sum of Rs.25,000/- per container was paid to the CHA for getting the consignment cleared. The imported newsprint paper would not be physically supplied to the RNI holder. Debit notes used to be raised and the newspapers would give him the payment against the debit notes. An equivalent amount in cash would be returned to the RNI holder to whom a small quantity of newsprint would be supplied. The rest used to be sold in the open market. 8. Mr. Prakash Garg stated that he was using the names of following RNI WP(C) Nos.2228/2008 & 8243/2008 Page 5 of 23 newspapers, i.e., (1) The Hawk, Haridwar (2) The Qaumi Patrika, Delhi (3) In Dinon (4) These Days and (5) Jadeed In Dinon. After encashing blank signed cheque of the RNI holder, he used to return the amount in cash to the respective newspapers and since the RNI holder was shown as importer he used to keep the rubber stamps of the RNI holder. The amount in cash would be returned to the respective newspaper. The statement of Mr. Vinod Kumar Singh, an employee of Mr.Prakash Garg was also recorded which corroborated the above statement of Mr. Prakash Garg. More details came forth from the statements of Mr. Utpal Gupta, the CHA, recorded on 28th December 2005 and 29th December 2005. The statements of a number of others were also recorded. 9. The show cause notice also records that Mr. G.S. Babbar, a Publisher and Controller of Qaumi Patrika/Qaumi Shaheed/Sankalp Times whose premises were searched on 12th January 2006, was summoned to the DRI office and his statements were recorded on 12th and 13th January 2006. On the basis of his statements, searches were conducted in the office premises, inter alia, NIPL and Mr. Praveen Kumar Goel on 15th February 2006. While documents relevant to the investigation were recovered from the office premises of NIPL, nothing relevant was found from the residential premises on Mr. Praveen Kumar Goel, searched on 15th February 2006. Mr. Praveen Kumar Goel was summoned and his statement was recorded on 1st March 2006 and 2nd March 2006 under Section 108 of the Act. He then disclosed that he used to place orders on overseas suppliers for import of newsprint/LWC paper in the name of various RNI holders, including Qaumi Patrika and Sandhya Qaumi Patrika WP(C) Nos.2228/2008 & 8243/2008 Page 6 of 23 since 2001-02 and that the paper imported in their names were kept in his godowns in Nangloi. He had supplied only 25% to 30% of the total quantity of the newsprint imported to the RNI holder and the rest was sold by him in the open market. For this, he used to pay Rs.500/- per metric tonne in cash to Mr. G.S. Babbar who used to raise debit notes in their name; used to give the amounts shown in the debit note to Mr. GS Babbar in cash and later on Mr. G.S. Babbar used to give him the cheque of the equivalent amount. After importing he used to keep the imported consignment in his godown and used to sell the consignments in the open market. 10. The show cause notice recorded that Mr. Praveen Kumar Goel was arrested under the Act on 2nd March 2006 and was remanded to judicial custody. The godowns of NIPL at Kavita Colony in Nangloi, Delhi in Khasra No.421, Village Hiran Kundli, New Delhi was sealed under separate panchnamas both dated 3rd March 2006. 11. The show cause notice sets out the analysis of the documents gathered during the searches and the statements recorded of said persons under Section 108 of the Act. The modus operandi was explained as under:- “The consignments imported in the guise of newsprint and LWC were not newsprint/LWC but were actually different kinds of paper with higher GSM, much more than 65 GSM and 72 GSM respectively, and were cleared at concessional rate of duty in the name of RNI holder. Such consignments have been fraudulently cleared by misdeclaring them newsprint which were actually chargeable to full rate of duty. WP(C) Nos.2228/2008 & 8243/2008 Page 7 of 23 The overseas supplier used to mention and change the description of goods in the import documents on the directions of Prakash Garg. The description of the imported paper on the bill of lading used to be Paper in Roll whereas, in the invoices and packing list, the description used to mentioned as Newsprint paper/LWC paper in reels; This is corroborated with the statement of Vinod Singh and Prakash Garg where they have stated how they use to manipulate the invoices; The invoices were also raised by the overseas suppliers at the behest of Prakash Garg showing much lesser value than agreed and the overseas supplier used to raise credit memorandum against the under-invoiced amount. In some correspondences, the indenting agents had mentioned in the correspondence made with the overseas supplier that by giving the description the description as Newsprint Paper, their party i.e. the importer could get the consignment cleared at concessional rate of duty. Such overseas suppliers and their indentors have actively connived with Prakash Garg in the commission of this fraud; The documents also established that how the payments of the differential amount were routed to the overseas supplier. Some charts resumed, prepared by Nambiar, clearly showed the actual contracted price and the invoiced price.” 12. On 28th August 2006, the DRI issued a show cause notice under Section 124 of the Act to NIPL seeking extension of time limit by six months under the proviso to Section 110 (2) of the Act in respect of the goods placed in the godowns of NIPL at Kavita Colony and Village Hiran Kudna. The adjudicating authority i.e., the Commissioner of Customs by an order dated 1st September 2006 extended the time limit for issuance of show cause notice in respect of the above goods. Against the aforementioned order dated 1st WP(C) Nos.2228/2008 & 8243/2008 Page 8 of 23 September 2006, passed by the adjudicating authority, NIPL filed an appeal before the Customs Excise & Service Tax Appellate Tribunal (CESTAT), New Delhi on 9th October 2006. The stay application of NIPL was dismissed by the CESTAT on 21st November 2006. 13. The show cause notice dated 22nd December 2006 indicated NIPL and Mr. Praveen Kumar Goel as Noticees Nos.13 and 14 respectively. A similar show cause notice dated 23rd December 2006 in relation to RNI holder, Kranti Sankalp in whose name the above imports were made which resulted in diversion of newsprint to the domestic market, was also issued. On 2nd March 2007 in relation to the show cause notice dated 22nd December 2006 issued in respect of RNI holder, Qaumi Shaheed, an addendum was issued adding paras 40, 40A, 40B, 40C and 40D to the earlier show cause notice dated 22nd December 2006. In the said show cause notice it was noted that a letter had been received on 8th July 2006 from the Advocate for NIPL, alleging that the DRI had taken away all the documents from the office of the NIPL without preparing any panchnama and that no documents have been provided till that date. It was further mentioned in the letter dated 12th July 2006 by the advocate of NIPL that it was not possible to get the inventorization done due to the indisposition of Mr. Praveen Kumar Goel. In para 40D, it was mentioned that by a letter dated 4th August 2006 the DRI clarified to Mr. Praveen Goel that the search of premises of NIPL was conducted under a proper search authorisation issued under Section 105 of the Act and that the documents have been seized by drawing up a proper panchnama. He was directed to be present in the DRI office on any working day for inspection of documents. However, Mr. Praveen Goel did not turn up or cooperate in the WP(C) Nos.2228/2008 & 8243/2008 Page 9 of 23 investigation. 14. The addendum to the show cause notice added further paragraphs 63A, 63B, 63C and 63D in which it was noted that although Mr. Praveen Goel appeared in the DRI office on 3rd October 2006 and informed them that he would accompany the DRI officers within ten days for examination/inventorization of the goods kept in the two godown premises, he did not turn up for that purpose. Although summoned to appear on 13th October 2006 and 16th November 2006 he did not appear in the DRI office. On 2nd November 2006 the DRI supplied copies of the documents seized from the office premises of NIPL. This was received by an employee of NIPL. The rest of the documents were supplied on 28th November 2006 which were received by the daughter of Mr. Praveen Goel. 15. The addendum to the show cause notice also noted that against the order dated 21st November 2006 passed by the CESTAT, NIPL and Mr. Praveen Goel filed Writ Petition (Civil) Nos.18208 of 2006 and 18209 of 2006 in this Court seeking directions to the CESTAT to delete the observations made in the order dated 21st November 2006. By an order dated 8th December 2006 this Court directed the adjudicating authority to grant a post-decisional hearing. The addendum dated 2nd March 2007 to the show cause notice further noted that an application was filed by the DRI in the Criminal Court for the cancellation if the bail granted to Mr. Praveen Goel as he was refusing to cooperate in the investigations. The ACMM by an order dated 24th February WP(C) Nos.2228/2008 & 8243/2008 Page 10 of 23 2007 directed Mr. Praveen Goel to report to the Senior Intelligence Officer within a period of seven days from 24th February 2007 with prior intimation to the Senior Intelligence Officer at least one day in advance. 16. The addendum to the show cause notice recorded in paras 65 F and 65 G that by a letter dated 28th February 2007, the DRI advised Praveen Goel to be present at the godown premises on 1st March 2007 for the purpose of examination/inventorization of the goods lying therein. The letter was served upon Mr. K.C. Goel, the father of Praveen Goel. A copy was also sent to his counsel. The DRI officers on 1st March 2007 waited for a considerable period of time at the godown premises but neither Mr. Praveen Goel nor his authorized representative turned up. Thereafter the goods stored in the two godowns located in Kavita Colony and village Hiran Kudna were examined in the presence of witnesses. Two separate panchnamas dated 1st March 2007 were drawn up. Different types of papers were recovered and were inventorised in the presence of witnesses and under the Act. Representative samples were drawn for testing purposes. The details of the papers seized in both the godowns were as under:- Sl. No. Godown Quantity seized (Paper Rolls and Paper Sheets) Value of the paper seized 1. 11/16, Kavita Colony, Nangloi, Delhi 353.535 MTs Rs.1,59,09,098/- 2. Khasra No.421, Village Hiran Kudna, Rohtak Road, Nangloi, Delhi 142.225 MTs Rs.64,00,125/- TOTAL 495.76 MTs Rs.2,23,09,223/- WP(C) Nos.2228/2008 & 8243/2008 Page 11 of 23 17. Finally the addendum dated 2nd March 2007 to the show cause notice dated 22nd December 2006 noted that apart from the 1905.45 MTS of paper mis-declared as SNP and NIPL had also imported as under:- “…. including 495.76 MTs of imported paper valued at Rs.22309223/- seized vide two separate panchnamas dated 1.3.07 from the godown premises situated at 11/16, Kavita Colony, Nangloi, Delhi and at Khasra no.421, Village Hirankudna, Rohtak Road, Delhi.” 18. In response to a letter dated 5th March 2007 written by the Petitioner to the DRI, the DRI by a letter dated 15th March 2007 asked him to approach the adjudicating authority, i.e., the Commissioner of Customs for release of the seized goods lying in the two godowns. This was reiterated by a letter dated 24th April 2007. The Petitioners, however, contested the above statements. They wrote again on 5th May 2007 to the DRI, stating that there was confusion as to which authority had to be approached for release of the goods. On 25th June 2007 the Commissioner of Customs wrote to Mr. Praveen Goel asking him to produce the import documents like Bills of Lading, Bills of Entry, price list, etc., with regard to the seized goods to enable them to release the goods provisionally. In the circumstances, NIPL filed a Writ Petition (Civil) No.3813 of 2007 in this Court seeking provisional release of the goods. 19. On 6th September 2007 this Court passed an order disposing of the said writ W.P.(C) No. 3813 of 2007 by a detailed order. This Court noticed that by a letter dated 7th May 2007, the Assistant Director, DRI had indicated the terms upon which the goods could be released. This included payment of WP(C) Nos.2228/2008 & 8243/2008 Page 12 of 23 differential duty involved on the seized goods and execution of bank guarantee to the extent of 25% of the seizure value. The other conditions included execution of indemnity bond to the extent of full seizure value of seized goods, execution of an affidavit by the party that he will not challenge the identity of the seized goods during the course of adjudication or prosecution proceedings, if any. The submission of the counsel for the Petitioner that the Respondent could not have acted outside the scope of the Customs (Provisional Duty Assessment) Regulations, 1963 („PDA Regulations‟) and only 20% of the duty could have been insisted upon for being paid as a pre-condition for such provisional release, was noticed. The response of the DRI that the Petitioner had not yet produced the import documents as requested in the letter dated 25th June 2007, was also noticed. Thereafter this Court issued the following directions:- “(a) The petitioner‟s representative shall be present before the Additional Commissioner (Adjudication) on 17.9.2007 at 11 a.m. with all the necessary documents indicated in the letter dated 25.6.2007. After submission of these documents, the respondent shall inspect the godown which is presently sealed and to relate them with the documents. (b) After completion of above exercise the Custom Authorities shall proceed to issue an appropriate adjudicatory order provisionally assessing the goods in accordance with law within four weeks, thereafter. (c) It is open to the Customs Authorities to seek assistance of such other parties as may be necessary for effective adjudication of the matter.” 20. It appears that despite the above directions, Mr. Praveen Goel was not personally present with all the documentation before the Additional Commissioner (Adjudication) on 17th September 2007. The Petitioners have WP(C) Nos.2228/2008 & 8243/2008 Page 13 of 23 placed on record a letter dated 19th September 2007 of Mr. Praveen Goel and claim that the documents had been supplied on 17th September 2007. A further letter dated 20th September 2007 claimed that they had made an effort to have a personal hearing but that could not take place as they were informed that the Commissioner of Customs was engaged in granting personal hearings in pre- fixed matters. As a result this Court was again approached with an application. 21. It appears that ultimately on 23rd October 2007 in the presence of two panchas inventorization took place at the godown at Kavita Colony in Nangloi. It recorded that Mr. K.C. Goel, Mr.Praveen Goel and the advocate representing NIPL were present. In relation to the roll mentioned at Sl. No.1 in Annexure `A‟ of the panchnama dated 1st March 2007, Mr. K.C. Goel produced a Bill of Entry dated 3rd March 2006, invoice dated 6th January 2006 and the packing list. It was noticed that the container no. mentioned in the delivery note tallied with the container no. given in the Bill of Entry. However, the delivery note did not bear the stamp/sign either of the Customs authorities or of the Bank and therefore was rejected by the DRI officers. Thereafter Mr. K.C. Goel and his counsel informed that they would not participate in the panchnama proceedings till the Customs authorities appeared at the site. Consequently the panchnama proceedings were concluded. 22. CM No. 15417 of 2007 filed by the Petitioners in the disposed of Writ Petition (Civil) No.3813 of 2007, complaining that the officials of the Customs were not coming forward for correlation since the DRI had already WP(C) Nos.2228/2008 & 8243/2008 Page 14 of 23 issued departmental enquiries against the Customs officials, was disposed of by this Court on 29th November 2007 with the following order: “C.M.No.15417/2007 It is stated by counsel for the respondents that there were some discrepancies in the documents since the delivery notes did not bear the stamp of the Customs Authorities. It was submitted on behalf of the petitioner that a fresh exercise of co- relating the goods can be carried out, if the applicant is so agreeable for this purpose after which the necessary orders would be made by the Authority empowered under the Customs Act under Section 110-A. In view of the above statement, the two premises shall be visited by the concerned Authorities under the Customs Act for the purpose of settling/co-relating the documents with the goods on 11th & 12th December, 2007 at 11.00 AM. After completion of the said exercise appropriate order either accepting the petitioner‟s request or rejecting it shall be passed by the concerned authorities under the Customs Act, empowered to deal with such application for release of goods in terms of the Customs (Provisional Duty Assessment) Regulations, 1963 shall be made, within 4 weeks of the said dates of inspection. The application is disposed of in terms of the above directions.” 23. On 11th December 2007 fresh panchnamas were drawn up in relation to the goods at both godowns. In relation to the goods at Kavita Colony godown, the officers of the DRI and customs produced six Bill of Entries and the details thereon were tallied with the stored goods. While goods mentioned at Sl. Nos.1 and 2, i.e., Bill of entry No.437233 dated 6th July 2005 and 463584 dated 8th November 2005 tallied with the documents submitted by the parties, the Bill of Entry at Sl. Nos.5 and 6 showing the names of the importers as M/s Reliant Media Pvt. Ltd. and M/s Competition Review Pvt. Ltd. were, WP(C) Nos.2228/2008 & 8243/2008 Page 15 of 23 according to the importer, not part of the investigation. There were discrepancies as regards the goods at Sl. Nos.3 and 4 as well. As regards the Hiran Kudna godown, rolls at Sl. Nos.4 and 5 had no markings