2007 (9) TMI 468 - AT - Customs

Confiscation of export goods - EXIM - Valuation - Confiscation of goods - Prohibited goods or not? - Whether there has been over-valuation of the goods or not?

Summary

Issues Involved:
1. Whether the goods can be considered as prohibited goods by evaluating the violation of Foreign Exchange Regulation.
2. Examination of overvaluation of the goods based on the material brought on record during investigations.

Issue-Wise Detailed Analysis:

1. Prohibited Goods and Violation of Foreign Exchange Regulation:

The Tribunal was tasked with determining whether the goods could be considered prohibited by examining compliance with Foreign Exchange Regulation. Prohibited goods, as defined under Section 2(33) of the Customs Act, 1962, include any goods whose import or export is subject to any prohibition under this Act or any other law in force.

The Tribunal referred to the Apex Court's directive to consider provisions of FEMA, Foreign Trade (Development and Regulation) Act, 1992, and the Customs Act, 1962. It was noted that under Section 7 of FEMA, exporters are required to furnish true and correct material particulars, including the full export value of goods. Failure to declare the correct value constitutes a violation of Section 7 of FEMA.

Further, Rule 11 of the Foreign Trade Regulation Rules, 1993 mandates that exporters must declare the value and description of goods accurately. Mis-declaration results in contravention of Section 11, making the goods liable to confiscation. Section 50(2) of the Customs Act also requires accurate declaration of the contents in the shipping bill. The Tribunal concluded that any mis-declaration of value or description amounts to a violation, rendering the goods prohibited under Section 2(33) of the Customs Act, 1962.

2. Overvaluation of Goods:

The Tribunal examined the evidence regarding the overvaluation of goods. The panchnama proceedings revealed that the goods were of sub-standard quality, loosely stitched, uneven, and unfit for wear. Statements from various individuals, including suppliers, employees, and the exporter, confirmed that the goods were highly overvalued and had no commercial value. These statements were not retracted, and the Tribunal found them credible.

The Tribunal rejected the appellants' contention that the absence of expert opinion on the nature of goods invalidated the overvaluation charge. It was determined that the statements of individuals involved in handling the goods sufficed to establish their sub-standard nature and lack of commercial value.

Judgment:

The Tribunal held that the goods were overvalued and mis-described, making them liable for confiscation under Section 113(i) of the Customs Act, 1962. Consequently, the denial of DEPB credit amounting to Rs. 41,06,700/- was upheld. However, the confiscation of goods seized at the Secunderabad godown was set aside as no shipping bills were filed for them.

Penalties:

Penalties under Section 114(i) of the Customs Act were imposed on individuals involved in the overvaluation and mis-description of goods:
- Shri Suresh Jhunjhunwala: Penalty reduced from Rs. 40 Lakhs to Rs. 15 Lakhs.
- Shri Deepak Jhunjhunwala: Penalty reduced from Rs. 30 Lakhs to Rs. 10 Lakhs.
- Shri Sachin Jhunjhunwala: Penalty reduced from Rs. 25 Lakhs to Rs. 3 Lakhs.
- Shri V.K. Singh: Penalty reduced from Rs. 25 Lakhs to Rs. 5 Lakhs.

The penalty on Shri Satyapal Reddy was set aside due to lack of evidence showing his knowledge of the mis-declaration.

Conclusion:

The Tribunal concluded that the goods were overvalued and mis-described, thereby justifying their confiscation and the imposition of penalties on the responsible individuals. The judgment emphasized the importance of accurate declarations in export documentation and compliance with foreign exchange regulations.