2011 (2) TMI 679 - AT - Customs

Confiscation of export goods - It is a case involving fraud with intention of defrauding the government on realization of foreign exchange and also with intention of claiming drawback against fraudulent shipping documents. The Appellants have helped the main fraudster in perpetrating the fraud by issuing Bills of Lading showing the dates as desired by the fraudster in contravention of established practices of shipping trade and helping him to export of goods contrary to prohibition prescribed under law in force - Thus find the charge against them of commission of wrongful act which made the export goods liable to confiscation is substantiated and therefore is no merit in the Appeal.

Summary

Issues Involved:
Fraudulent export scheme involving shipping agents; Violation of Customs Act by shipping agents; Allegations of fraudulent export proceeds realization; Penalty imposition on shipping agents.

Analysis:
1. Fraudulent Export Scheme:
The case involves a fraudulent export scheme where certain exporters defrauded the government by availing fraudulent drawbacks to the tune of Rs. 20.6 crores. The investigation revealed that the consignees in Russia did not exist, goods did not reach Russia, and there were mis-declarations in export documents. The shipping agents, including the Appellant, were alleged to have facilitated this fraud by manipulating dates on Bills of Lading to show fraudulent realization of export proceeds.

2. Violation of Customs Act:
The Customs Act provisions were invoked against the shipping agents for their role in the fraudulent scheme. The shipping agents were accused of contravening provisions related to realization of foreign exchange, leading to penalties under Sections 113(d), 113(i), and 114 of the Customs Act. The Appellant challenged the penalty imposed, arguing that they did not violate any law as shipping agents.

3. Allegations of Fraudulent Export Proceeds Realization:
The investigation highlighted that export proceeds were settled through a "State Credit Scheme" instead of remittance of freely convertible foreign exchange. The shipping agents were accused of facilitating fraudulent receipt of export proceeds by falsely indicating dates on Bills of Lading, allowing the exporters to claim fraudulent drawbacks.

4. Penalty Imposition on Shipping Agents:
The Appellant contested the penalty imposed under Section 114 of the Customs Act. They argued that they issued Bills of Lading only upon the shipper's demand and followed the Hague Conventions, which mandate issuing Bills of Lading upon request. However, the tribunal found the Appellant's actions prima facie fraudulent as the Bills of Lading were issued after the delivery of goods abroad, indicating fraudulent practices.

In conclusion, the tribunal rejected the Appeal, upholding the penalty imposed on the shipping agents, including the Appellant, for their involvement in the fraudulent export scheme. The judgment emphasized the fraudulent nature of the actions taken by the shipping agents, which facilitated the main fraudster in perpetrating the fraud, leading to the substantiation of charges against them.