2005 (6) TMI 377 - AT - Customs

Summary

Issues:
Penalties imposed under Section 112 of the Customs Act for over-invoicing goods with intent to drain out foreign exchange.

Analysis:
The appellants filed Bills of Entry for importing CD ROMs declared as Multimedia Application Software, seeking duty exemption under Notification No. 11/97. However, it was discovered that the goods were over-invoiced to drain out more foreign exchange. The Commissioner imposed penalties on the appellant-company and its officials. The Tribunal found that the appellants promptly informed the suppliers about the substandard goods, stopped payment, and requested permission to re-export. They recovered the foreign exchange from the suppliers, preventing any drain of funds from India. The Commissioner's collusion allegations lacked evidence from the show cause notice. The Tribunal held that penalties under Section 112 were unjustified as the appellants took corrective actions and did not intend to illegally drain foreign exchange.

The Tribunal set aside the impugned orders, ruling in favor of the appellants. The actions taken by the appellants to rectify the situation, including stopping payment, seeking re-export permission, and recovering funds from suppliers, demonstrated their lack of intent to drain foreign exchange illegally. The Commissioner's allegations of collusion were baseless due to the appellants' proactive measures and lack of tangible evidence. The Tribunal emphasized that penalties under Section 112 could not be imposed without concrete evidence of wrongdoing, which was absent in this case. The appellants were granted consequential relief in accordance with the law, and the orders were overturned entirely.

This judgment highlights the importance of prompt corrective actions by importers in cases of discrepancies to prevent unjust penalties under the Customs Act. It underscores the necessity of substantial evidence before imposing penalties and the significance of transparency and cooperation between importers and authorities to resolve issues effectively.