2014 (10) TMI 47 - AT - Customs

Confiscation of goods - Redemption fine - Misdeclaration of goods - Attempt to export non basmati rice in guise of basmati rice - Held that - in the guise of basmati rice, attempt has been made to export non-basmati rice adopting a questionable modus operandi. Actually 34 containers were cleared from a port CFS Albatross. It came out that the containers were stuffed in such way that front row contained basmati rice and second row contained non-basmati rice. Samples were manipulated to gain favourable report confirming that the rice being exported was basmati rice. It was only on receipt of information and subsequent test report, questionable modus operandi of appellants, connivance of certain departmental officers as well as laboratory staff of SIIR, New Delhi came to light. Such practice was followed to defraud the revenue. Only one sample in respect of test memo no.45 failed the specification and did not conform to the requirement as laid down by DGFT Notification No. 39/(RE-2008)/2004-2009 dated 16.9.2008 as amended, that is, grain of rice to be exported shall be more than 7 mm of length and ratio of length/breadth of the grain shall be more than 3.6 mm. Confiscation of the goods and imposition of redemption fine of ₹ 68 lakhs in the circumstances of the case is justified. This is exemplary case where higher penalty is warranted and no leniency is deserved. We do not consider it proper to interfere with order of redemption fine as it is appropriate and justified. Similarly, there is no scope for reduction of penalty of ₹ 10 lakh imposed on the appellant as their modus operandi proved that they were consciously involved in the export of non-basmati rice which were prohibited goods. Similarly role of CHA was contrary to the CHALR 2004. Attempt to export non-basmati rice in the guise of Basmati rice would not have been possible without CHA s involvement. Their conduct and contradictory stand by Shri Sunil Bhatia CHA and his manager Shri Sushil Malik regarding physical verification proves their active involvement. Same CHA s name has also come in appellant s other company M/s Vaibhav Overseas where similar modus operandi was noticed. We are convinced that CHA has rightly been imposed penalty. Considering amount of penalty being low but revenue not being in appeal, we do not interfere to the penalty imposed in adjudication and uphold the same. - Decided against assessee.

Summary

Issues Involved:
1. Confiscation of non-basmati rice under Section 113(d) of the Customs Act, 1962.
2. Imposition of penalties under Sections 114(i) and 114AA of the Customs Act, 1962.
3. Legality of the re-examination and retesting of the samples.
4. Validity of the redemption fine and penalties imposed.

Issue-wise Detailed Analysis:

1. Confiscation of Non-Basmati Rice:
The appellants, M/s Prince International, Shri Gyan Chand, and M/s Kunal Travels (Cargo), appealed against the Order-in-Original No. 26/Commissioner/2009 dated 16/9/2009, which confiscated non-basmati rice weighing 824.500 MT valued at Rs. 4,59,80,285.00 under Section 113(d) of the Customs Act, 1962. The rice was seized under panchnama dated 04.06.09 and was found to be non-basmati rice, a prohibited item for export as per Notification No. 39 (RE-2008)/2004-09 dated 16/09/2008. The rice was loaded in 34 containers and seized for being misdeclared as basmati rice.

2. Imposition of Penalties:
A penalty of Rs. 10 lacs was imposed on M/s Prince International under Section 114(i) of the Customs Act, 1962, and Rs. 2.5 lacs on Shri Gyan Chand, partner of M/s Prince International, under Section 114AA of the Customs Act, 1962. Additionally, a penalty of Rs. 75,000 was imposed on M/s Kunal Travels (Cargo) under Section 114AA of the Customs Act, 1962. The penalties were based on the findings that the appellants had fraudulently attempted to export non-basmati rice in the guise of basmati rice.

3. Legality of the Re-examination and Retesting:
Upon intelligence that non-basmati rice was being exported as basmati rice, the containers were called back for detailed examination. Initial visual inspection revealed that only the front rows contained basmati rice, while the rest contained non-basmati rice. Samples were drawn and sent to Shriram Institute of Industrial Research (SRI) and SGS, Gurgaon for testing. The test reports confirmed that the rice did not meet the specifications of basmati rice. The appellants argued that the department could not keep drawing samples for testing merely because initial reports were in their favor. However, the court found that the re-examination and retesting were justified due to the fraud and manipulation of samples.

4. Validity of the Redemption Fine and Penalties Imposed:
The court upheld the confiscation of the goods and imposition of a redemption fine of Rs. 68 lacs, stating that the appellants had a deliberate intention to export prohibited goods. The penalties imposed on M/s Prince International and Shri Gyan Chand were also upheld, as their actions constituted a premeditated effort to defraud the revenue. The court found no merit in the appellants' contention that the redemption fine and penalties were excessive, given the severity of the offense.

Conclusion:
The appeals filed by the appellants were rejected. The court found that the appellants had attempted to export non-basmati rice under the guise of basmati rice, using a fraudulent modus operandi. The confiscation of the goods, the imposition of the redemption fine, and the penalties were deemed appropriate and justified. The court emphasized that fraud vitiates every solemn act and upheld the actions taken by the customs authorities to prevent the export of prohibited goods.