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2011 (6) TMI 623 - AT - CustomsDuty demand - imposition of penalties - redemption fine Held that - source of procurement of CD roms were deliberately concealed to enable showing a higher purchase price and exported by declaring highly inflated value to claim undue benefit of DEPB credits. - The goods so exported are to be held liable for confiscation. - However as they are not available for confiscation the redemption fine imposed is set aside. Demand of duty confirmed against M/s. Classic ITM for imports made through third parties is set aside. Penalty of Rs. 10 lakhs under Section 114 and Rs.10 lakhs imposed under Section 112 on M/s. Classic ITM are upheld.
Issues Involved:
1. Duty demand and imposition of penalties and redemption fines. 2. Allegation of over-invoicing and mis-declaration of exported goods. 3. Legality of penalties under Sections 112 and 114 of the Customs Act. 4. Confiscation of goods and imposition of redemption fines. 5. Validity of DEPB scrips and related duty-free imports. 6. Roles and liabilities of individuals associated with the exporting firm. Detailed Analysis: 1. Duty Demand and Imposition of Penalties and Redemption Fines: - Appeal No. C/326/2006 involves M/s. Classic ITM against a duty demand of Rs. 27,70,000/-, penalties of Rs. 20 lakhs (Rs. 10 lakhs under Section 114 and Rs. 10 lakhs under Section 112), and a redemption fine of Rs. 10.5 lakhs. - Appeal No. C/327/2006 involves Alimuddin Rafi Ahmed against a penalty of Rs. 15 lakhs (Rs. 10 lakhs under Section 114 and Rs. 5 lakhs under Section 112). - Appeal No. C/328/2006 involves Abdul Salam against a penalty of Rs. 10 lakhs (Rs. 5 lakhs under Section 114 and Rs. 5 lakhs under Section 112). - Appeal No. C/342/2006 involves Ratinder Pal Singh Bhatia against a penalty of Rs. 10 lakhs (Rs. 5 lakhs under Section 114 and Rs. 5 lakhs under Section 112). 2. Allegation of Over-Invoicing and Mis-Declaration of Exported Goods: - M/s. Classic ITM filed shipping bills for export of 23,000 CD ROMs, declaring the value at US $18 per piece, while the market value was Rs. 28-30 per piece. - The CDs were shown to be purchased at Rs. 612 per CD from Harkishan Overseas, a dubious entity used for cheque discounting. - Investigations revealed the buyer, WGT, was not a genuine entity, with disconnected phone numbers and no registration with Sharjah Chamber Authority. 3. Legality of Penalties under Sections 112 and 114 of the Customs Act: - Section 114 penalties are imposed for acts or omissions rendering goods liable for confiscation. - Section 112 penalties are for actions making imported goods liable for confiscation. - Penalties were upheld for M/s. Classic ITM, Alimuddin Rafi Ahmed, and Ratinder Pal Singh Bhatia, but reduced for Alimuddin Rafi Ahmed and Ratinder Pal Singh Bhatia. - Penalties on Abdul Salam were set aside as separate penalties on partners are not justified when the firm is penalized. 4. Confiscation of Goods and Imposition of Redemption Fines: - The CDs were liable for confiscation due to over-valuation but were not available for confiscation, thus the redemption fine was set aside. - Imported goods using DEPB scrips were also liable for confiscation, but the redemption fine was set aside as the goods were not available. 5. Validity of DEPB Scrips and Related Duty-Free Imports: - DEPB scrips issued based on inflated export values were canceled by DGFT authorities. - Classic ITM's actions led to duty-free imports by third parties using these scrips, making the imported goods liable for confiscation. - The duty demand on Classic ITM for imports made through third parties was set aside. 6. Roles and Liabilities of Individuals Associated with the Exporting Firm: - Classic ITM's actions rendered the exported goods liable for confiscation, justifying penalties under Section 114. - Alimuddin Rafi Ahmed and Ratinder Pal Singh Bhatia were involved in procurement and financial manipulations, justifying penalties under Section 114. - Abdul Salam's penalties were set aside as separate penalties on partners are not justified when the firm is penalized. Conclusion: - The decision of the Commissioner that 23,000 pieces of CD ROMs exported are liable for confiscation was upheld, but the redemption fine was set aside. - The goods imported using canceled DEPB scrips were liable for confiscation, but the redemption fine was set aside. - The duty demand on M/s. Classic ITM for imports made through third parties was set aside, but penalties under Sections 114 and 112 were upheld. - Penalties on Alimuddin Rafi Ahmed and Ratinder Pal Singh Bhatia were reduced, and penalties on Abdul Salam were set aside.
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