2007 (1) TMI 29 - HC - Customs

Penalty Alleged that the appellant (CHA) knew that goods were misdeclared by the exporter and higher value was mentioned to draw higher rate of duty drawback After considering the details find that the allegation right and accordingly penalty imposed on him

Summary

Issues:
Appeal under Section 130 of the Customs Act against the impugned order dated 21st November, 2005 passed by the Custom, Excise and Service Tax Appellate Tribunal. The role and liability of a Custom House Agent (CHA) in export transactions under the Duty Drawback Scheme.

Analysis:
The case involved five firms exporting ready-made garments under the Duty Drawback Scheme through a CHA company, where discrepancies were found in the goods declared for export. Some containers were detained, and upon re-examination, it was discovered that old and used garments were exported instead of the declared new garments. The goods were overvalued to claim a higher rate of drawback. Show cause notices were issued for confiscation of the seized goods, disallowing the drawback, and imposing penalties. The adjudicating authority confiscated the garments and imposed penalties on the involved parties.

The appeal against the adjudication order was dismissed by the Tribunal, leading to the current appeal. The Appellant argued that the CHA's role is limited to submitting export documents, and it is the Customs Department's duty to verify the information and examine the goods. The Appellant claimed no direct involvement in the export process, stating compliance with CHA regulations. However, the Tribunal found the Appellant aware of the misdeclaration and overvaluation of goods, as per the exporter's disclosure to the Appellant regarding fraudulent drawback claims.

The Tribunal upheld the findings that the Appellant was aware of the misdeclaration and overvaluation, failing to exercise due diligence as required by CHA regulations. The Appellant's knowledge of the discrepancies and failure to take precautions in filing shipping bills led to the dismissal of the appeal. The Tribunal's findings were considered factual and not perverse, supporting the decision to dismiss the appeal due to the Appellant's awareness of the fraudulent activities in the export process.

In conclusion, the Appellant's knowledge of the misdeclaration and overvaluation of goods for fraudulent drawback claims, without taking necessary precautions, led to the dismissal of the appeal. The Tribunal's decision was upheld based on factual findings, emphasizing the CHA's obligation to exercise due diligence in ensuring accurate information in export transactions.