2015 (4) TMI 416 - AT - Customs

Waiver of pre deposit - Fraudulent import of the electronics items - Misdeclaration and undervaluation of goods - Lifting of corporate veil - Held that - Prima facie it appears that contemporaneous evidence gathered by DRI proved under valuation of goods imported and mis-declaration came to light. He had connived with the exporters and failed to adduce evidence to defend against the allegations made in Show Cause Notice. NIDB data used against the appellants brought out mis-declaration of value. Revenue also found that Shri K.S. Sultania had fabricated invoices with the abetment by exporters to cause evasion. He was involved in hawala deal. K.S. Sultania being proprietor of Ms/ Pearly Electronics and other 3 firms were created by him making benamidars proprietor thereof, Revenue lifted corporate veil in para 7(Vii) of Show Cause Notice at page 17 thereof. Duty was imposed on Pearl Electronics on its own imports as well as imports made in the name of other 3(three) dummy firms created by him, treating K.S. Sultania as the owner thereof. Penalty of ₹ 15.00 lakhs was imposed on Shri K.S. Sultania for contravention of provisions of law and penalty of ₹ 10.00 lakhs was also demanded from M/s Sultania & Co. finding involvement of his son in that firm. Appellants contention that joint and several liability is not permissible does not appeal to have basis. At this stage when corporate veil was lifted as stated above, there is no scope of grant waiver of pre-deposit. So also mis-declaration was based on evidence gathered by investigation. - Partial stay granted.

Summary

Issues involved:
1. Fraudulent import of electronics items with intent to evade customs duty.
2. Mis-declaration of value and description of imported goods.
3. Under-invoicing and evasion of customs duty.
4. Control of dummy units for fraudulent imports.
5. Confiscation, penalty, and enforcement of liabilities.
6. Joint and several liability of importers.
7. Mis-declaration of imports and time-bar defense.

Detailed Analysis:
1. The investigation revealed that the appellant was engaged in fraudulent imports of electronics items like Integrated Circuits, Transistors, and Diodes from Hong Kong and China, mis-declaring value and description to evade customs duty deliberately. The appellant controlled multiple firms to carry out these activities, resulting in evasion of customs duty amounting to a significant sum.

2. The appellant managed under-invoicing of electronic components in collusion with foreign suppliers, remitting the price difference through hawala channels. The mis-declaration and undervaluation were evident from the comparison with similar imports by other legitimate importers at higher values. The appellant also sold the goods in the local market without proper documentation, further indicating fraudulent practices.

3. The appellant controlled dummy units, operated bank accounts using benamidar proprietors, and made payments in cash for services, all funded by black money. The investigation established gross under-valuation and mis-declaration of Diodes and Transistors, leading to the revaluation of imports and imposition of penalties under relevant customs rules.

4. The adjudicating authority imposed penalties, recovery of duty differentials, and confiscation of imports based on the evidence of mis-declaration and evasion. The penalties were imposed on the appellant and related individuals for contravention of customs laws, with specific amounts and enforcement mechanisms detailed in the order.

5. The appellant challenged the joint and several liability imposed on them, arguing that each firm should be adjudicated separately. However, the authority upheld the collective liability based on the appellant's control and involvement in all the import activities through the dummy units. The defense of no mis-declaration and time-bar was rejected by the revenue department, citing extensive investigation and evidence supporting the allegations.

6. The judgment emphasized the role of the appellant as the mastermind behind the fraudulent imports, controlling multiple entities to evade customs duties. The lifting of the corporate veil revealed the ultimate responsibility of the appellant for the mis-declaration and under-valuation of imports, leading to the imposition of penalties and liabilities on the appellant and related firms.

7. The final order directed the appellant to make significant deposits within a specified timeline, with a stay on the realization of the balance demand pending compliance. The judgment highlighted the seriousness of customs violations, the enforcement of penalties, and the rejection of defenses like time-bar in cases of deliberate fraud and evasion.