2011 (2) TMI 770 - AT - Customs

Confiscation of the fabrics - ST and SCPL joined together and inflated the value in the ARE-4 only and also in the shipping bill - It becomes relevant that ST and SCPL are sister concerns and are related to each other - Held that the supply by ST to SCPL is deemed export the value declared by ST to SCPL also becomes relevant since it is treated as export and in view of the inflation of value by ST which automatically result in inflation of value by SCPL the conclusion of the Commissioner that the goods are liable to confiscation since the same did not correspond with the value declared has to be upheld. Redemption fine - the real value of the goods was Rs.12 lakhs the redemption fine imposed appears to be very high and needs to be reconsidered - Further unfortunately the quantum of benefit that was available to the appellants because of inflation of value has not been discussed anywhere nor the appellants have chosen to indicate it - Therefore there is a need to reduce the redemption fine. As regards penalty on Shri S.T. Aorora the facts of the case and the evidences gathered clearly show that he was the mastermind behind the whole operation - Therefore penalty has been rightly imposed on him - But once again the penalty has to be proportionate to the offence committed and the fact that FOB value has been realized and the exact quantum of financial benefit that would have been derived has not been brought on record would result in a situation where have to take into account the value of the fabrics declared and determine the penalty on that basis - Another factor that is required to be taken into account is that penalty has also been imposed on SCPL. Further penalty on SCPL also is required to be considered in relation to the value of the goods and the benefits - Having regard to the facts and circumstances the nature of offence and the fact that unit is located in SEZ etc. consider it appropriate that reduction in fine penalty etc. is warranted. As regards Shri Shyamsunder Satyal as submitted he was only an employee and no evidence has been brought out to show that he was part of the operation and had deliberately involved himself - The facts brought out show that he was only performing functions which an employee would perform - Thus the penalty is being imposed on the M.D of the company SCPL and ST do not consider that penalty has to be imposed on Shri Shyamsunder Satyal.

Issues Involved:
1. Over-invoicing of exported goods.
2. Confiscation and redemption fine.
3. Penalties imposed on various parties.
4. Quality and valuation of goods.
5. Involvement of DEPB or drawback benefits.
6. Market survey and valuation evidence.
7. Cross-examination of witnesses.
8. Final assessment by Central Excise.
9. Proportionality of penalties.

Issue-wise Detailed Analysis:

1. Over-invoicing of Exported Goods:
The consignment was suspected of over-invoicing, leading to an investigation. The customs officers found the goods to be of very poor quality, with inferior packaging and disproportionate value compared to the quality. The market survey conducted revealed that the declared value of Rs. 88,47,337/- was significantly higher than the market value of Rs. 12,06,600/-. The Managing Director of SCPL, Shri S.T. Arora, agreed with the market value ascertained by the customs, and this statement was not retracted. The Tribunal upheld the customs' valuation.

2. Confiscation and Redemption Fine:
The impugned order confiscated the garments covered by the shipping bills, allowing them to be redeemed on payment of a fine of Rs. 8 lakhs. The Tribunal found the redemption fine to be very high considering the real value of the goods and reduced the fine to Rs. 4 lakhs.

3. Penalties Imposed on Various Parties:
Penalties were imposed on SCPL (Rs. 50 lakhs), ST (Rs. 30 lakhs), Shri S.T. Arora (Rs. 25 lakhs), and Shri Shyamsunder Satyal (Rs. 15 lakhs). The Tribunal found that the penalties were disproportionate and reduced them as follows: SCPL to Rs. 10 lakhs, ST to Rs. 5 lakhs, and Shri S.T. Arora to Rs. 2 lakhs. The penalty on Shri Shyamsunder Satyal was set aside, as he was only an employee performing his duties without evidence of deliberate involvement.

4. Quality and Valuation of Goods:
The customs officers found the goods to be of very poor quality, with the cartons being of inferior quality and lacking proper packing details. The market survey conducted with three leading shops confirmed that the value declared was disproportionately higher than the actual market value. The Tribunal upheld the customs' valuation based on the market survey.

5. Involvement of DEPB or Drawback Benefits:
The appellants argued that the export was undertaken without any export benefits like DEPB. However, the Tribunal found that ST could have claimed DEPB or drawback benefits, as per the exim policy. The Tribunal concluded that the appellants had planned to claim DEPB or drawback benefits, which justified the customs' suspicion of overvaluation.

6. Market Survey and Valuation Evidence:
The appellants challenged the market survey, arguing that the traders did not have expertise in readymade garments. However, the Tribunal found that the traders were experienced in dealing with garments and upheld the market survey results. The statement of Shri S.T. Arora agreeing with the market value further supported the customs' valuation.

7. Cross-examination of Witnesses:
The appellants requested cross-examination of the traders who provided the market value. The Tribunal found that since Shri S.T. Arora had agreed with the market value, there was no need for cross-examination. The statements of the processors, who admitted that the value was declared as per instructions from ST, were also considered sufficient.

8. Final Assessment by Central Excise:
The appellants claimed that the goods had been finally assessed by Central Excise, and therefore, the Commissioner could not determine the value afresh. The Tribunal found no evidence to support this claim and rejected it.

9. Proportionality of Penalties:
The Tribunal considered the proportionality of the penalties imposed. It noted that the exact quantum of financial benefit derived from the inflated value was not brought on record. Considering the facts and circumstances, the Tribunal found that a reduction in fines and penalties was warranted.

Conclusion:
The Tribunal upheld the customs' findings of overvaluation and the liability of the goods to confiscation. However, it reduced the redemption fine and penalties imposed, considering the proportionality and the facts of the case. The penalty on the employee, Shri Shyamsunder Satyal, was set aside.

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