2014 (1) TMI 1221 - AT - Customs

Waiver of pre deposit - Penalty u/s 114 - Confiscation u/s 113 - Over valuation of goods - Held that - goods have been held liable to confiscation under the provisions of Section 113(i) of the Customs Act for overvaluation of the goods under export. The overvaluation has been done by the exporter and the appellant-bank has no role to play in such overvaluation. No doubt there has been some negligence on the part of the bank in not properly verifying the export documents and recommending to the RBI for allowing remittance to the exporter under the Rupee-Rouble Trade Agreement. However, such omissions on the part of the bank do not fall within the scope of Section 113(i) and consequently no penalty is imposable on the appellant-bank under Section 114 - penalty cannot be imposed on the Bank Manager for not taking due caution before opening current account in the name of proprietor and company will not attract penalty under Section 114 - appellant-bank has made out a strong case in their favour for grant of stay - Stay granted.

Summary

Issues:
Alleged fraudulent availment of drawback on exported goods, imposition of penalty under Section 114 of the Customs Act, 1962 on the bank, liability of the bank for failure to scrutinize export documents, role of the bank in export transactions, applicability of penalties for negligence in banking transactions.

Analysis:
The judgment deals with an appeal and stay petition against an Order-in-Original imposing a penalty on a bank for alleged omissions in scrutinizing export documents. The case involved overvaluation of goods by an exporter and fraudulent availment of drawback, leading to the imposition of a penalty of Rs. 1 crore under Section 114 of the Customs Act, 1962. The bank was held liable for failing to properly scrutinize documents presented by the exporter, resulting in the bank's failure to protect government money amounting to Rs. 3,02,09,760. The bank contended that its actions were in good faith, following internal policies, and it was not obligated to independently verify all document details unless fraudulent on the face of it.

The Revenue argued that the bank's omissions, such as not noticing discrepancies in Bill of Lading details and the absence of a Letter of Credit for exports to Russia, led to the wrongful grant of remittance to the exporter. The bank's failure to adhere to RBI guidelines and export conditions under the Rupee-Rouble Trade Agreement was highlighted as reasons for imposing the penalty under Section 114 of the Customs Act, 1962.

The Tribunal considered past judgments related to banking transactions in export cases to determine the bank's liability. It cited precedents where penalties were not imposed on banks for negligence unless there was evidence of intentional wrongdoing or handling of goods/documents leading to confiscation. The Tribunal noted that while there was negligence on the bank's part in verifying export documents, it did not amount to actions falling under Section 113(i) for confiscation or Section 114 for penalties.

Ultimately, the Tribunal found in favor of the bank, granting an unconditional waiver from pre-deposit of the penalty and staying its recovery during the appeal's pendency. The decision was based on the bank's demonstration of a strong case and the absence of grounds for imposing penalties under the Customs Act, 1962.