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2011 (2) TMI 689 - AT - CustomsIllegal export - goods exported did not reach the destination in Russia - over-valuation of the goods exports done by the Appellants to claim higher duty draw back and DEPB Credits fraudulently and provisions of re-payment of State Credit System was abused, investigation was done against M/s. Hem Chand Gupta and Sons in Appeal case No. 46/09 and the Appellant Gee Dee International in appeal case No. 47/09 - It was noticed that the importers in Russia were not in existence and the exports were diverted to a third country without being exported to Russia violating conditions of re-payment of State Credit scheme and the advances sent from Russia from particular Accounts went back to some account - Held that - Prima facie, it appears that aforesaid considerations like fraudulent practice of discharge of export at different port, non-receipt of goods in Russian Port, overvaluation of goods, questionable modus operandi followed by appellants as reported by Consulate Genera of India, non-existence of importing concerns, going back of advances received to the same accounts in Russia, cripple the appellants from the benefit of Apex Court Judgment in EHSANA DIST. CO-OP. MILK P.U. LTD. Versus UNION OF INDIA - (2003 -TMI - 46557 - SUPREME COURT OF INDIA) - Therefore without expression of any opinion at this stage, we direct that the appellant M/s. Hem Chand Gupta and Sons and M/s. Gee Dee International should make pre deposit of 25% of the duty drawback availed by them.
Issues Involved:
1. Confiscation of exported goods and imposition of fines. 2. Recovery of drawback amounts and interest. 3. Imposition of penalties. 4. Over-valuation of exported goods. 5. Compliance with the Repayment of State Credit Scheme. 6. Applicability of judgments in Terai Overseas Ltd. and Sun Industries cases. Detailed Analysis: 1. Confiscation of Exported Goods and Imposition of Fines: The Tribunal upheld the confiscation of readymade garments exported by the appellants under Sections 113(d) and 113(i) of the Customs Act, 1962. The goods were not physically available for confiscation; hence, fines of Rs. 6 crores and Rs. 7.25 crores were levied on M/s. Hem Chand Gupta & Sons and M/s. Gee Dee International, respectively, in lieu of confiscation. 2. Recovery of Drawback Amounts and Interest: The Tribunal ordered the recovery of drawback amounts of Rs. 6,58,22,845/- and Rs. 7,96,78,663/- availed by M/s. Hem Chand Gupta & Sons and M/s. Gee Dee International, respectively, under Rules 16 and 16A of the Customs and Central Excise Duties Drawback Rules, 1995. Interest on these amounts was also directed to be recovered under Section 28AA read with Section 75A(2) of the Customs Act, 1962. 3. Imposition of Penalties: Penalties were imposed under Section 114 of the Customs Act, 1962, as follows: - Rs. 2 crores on M/s. Hem Chand Gupta & Sons. - Rs. 2.5 crores on M/s. Gee Dee International. - Rs. 50 lakhs each on Shri Jai Dev Gupta and Shri Kapil Dev Gupta. 4. Over-valuation of Exported Goods: The Tribunal noted that the appellants resorted to overvaluation to claim higher duty drawbacks and DEPB credits fraudulently. It was observed that the goods did not reach the Russian destination, and the importers in Russia were non-existent. The goods were diverted to third countries, violating the conditions of the Repayment of State Credit Scheme. 5. Compliance with the Repayment of State Credit Scheme: The Tribunal emphasized that the goods must reach the Russian Federation as per the RBI Circular No. 4 dated 19-5-1999. The appellants failed to comply with this requirement, as the goods were diverted to other destinations. The Tribunal cited the Delhi High Court's decision in Rajeev Verma v. Union of India, which held that misdeclaration of the port of discharge/destination under the Repayment of State Credit Scheme is actionable under Section 113(i) of the Customs Act, 1962. 6. Applicability of Judgments in Terai Overseas Ltd. and Sun Industries Cases: The Tribunal distinguished the present case from the Terai Overseas Ltd. and Sun Industries cases. It noted that the relevant provisions of Section 75 of the Customs Act, 1962, were amended in 1991, requiring the receipt of sale proceeds for the grant of duty drawback. The Tribunal concluded that the ratios of the cited judgments were not applicable due to the amendments and the specific requirements of the Repayment of State Credit Scheme. Conclusion: The Tribunal directed the appellants to make a pre-deposit of 25% of the duty drawback availed, after adjusting Rs. 25 lakhs already deposited during the investigation. The realization of the balance demand was stayed during the pendency of the appeal, considering the financial difficulties pleaded by the appellants. The judgment was pronounced on 1-2-2011.
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