2016 (1) TMI 1051 - AT - Customs

Fraudulent claim of export incentive schemes viz. DEPB, DEEC and rebate - Department s case is that these companies have claimed to have exported various chemicals, pesticides and dyes, however in fact there was no export of the declared chemicals/dyes/pesticides and the goods declared in the shipping bills have not been exported and in their place some unknown chemicals were exported. Held that - At the time of hearing, the plea taken by the Ld. Counsels is that duty liability cannot be fixed jointly and severally on the exporters as well as the importers. - Therefore we order remand of these cases for fresh adjudication by the Commissioner for fixing the duty liability appropriately. Needless to say, the appellants will be afforded an opportunity of personal hearing and the principles of natural justice will be followed. Confiscation and redemption - Held that - it is a settled position in law that goods which are not available cannot be confiscated and redeemed. The Commissioner will no doubt consider this aspect legally. At this stage, we do not make any observation on the applicability of extended time period under Section 28 (1) of the Customs Act. However this matter shall also be considered by the Commissioner after fixing the duty liability. Imposition of penalties on the High Sea Sellers. - varying amounts of penalty imposed on the various high sea sellers depending on their role in availment of Cenvat Credit on the goods sold by them on high sea basis. - The contention of the counsels is that penalty cannot be imposed on the appellants under Rule 26 as they have not dealt with excisable goods. - Held that - the goods which are still on high seas cannot be held to be liable to confiscation in terms of Rule 25 above. It has not been shown, in terms of the above Rule that the High Sea Sellers have contravened any provisions of Central Excise Rules with intent to evade payment of Central Excise duty when the goods are still on High seas. It cannot be held that because the goods will be diverted and not used by the companies after clearance from Customs, the offence already stands committed on the sale of the goods on High seas. - the question of imposition of penalty under Rule 26 of the Central Excise provisions on goods on high seas does not arise. Levy of penalties on the indigenous suppliers - Held that - the supplier has certainly knowingly removed the excisable goods in contravention of the Rules. This act of theirs facilitated the fraudulent availment of Cenvat credit by the consignee. Therefore the indigenous suppliers are liable to penalty under Rule 26. We uphold the order of Commissioner imposing penalties on the indigenous suppliers. The penalties against appellant officers are also set aside.

Issues Involved:
1. Confiscation of goods and duty liability on exporters and importers.
2. Imposition of penalties on High Sea Sellers.
3. Imposition of penalties on Indigenous Suppliers.
4. Imposition of penalties on Central Excise Officers.
5. Imposition of penalties on Brokers.
6. Departmental appeals regarding penalties and duty confirmation.

Comprehensive, Issue-Wise Detailed Analysis:

1. Confiscation of Goods and Duty Liability on Exporters and Importers:
The Tribunal addressed the issue of confiscation of goods exported and imported by DEPB holders and the joint and several duty liabilities on exporters and importers. The Tribunal agreed with the contention that duty liability cannot be fixed jointly and severally on both parties, citing previous cases (Rajesh Kumar Agarwal vs CCE and Golden Tobacco Ltd. vs CCE). Consequently, the Tribunal remanded the cases for fresh adjudication by the Commissioner to fix the duty liability appropriately, ensuring the principles of natural justice are followed. The Tribunal also noted that goods not available cannot be confiscated and redeemed and that the applicability of the extended time period under Section 28 (1) of the Customs Act should be considered by the Commissioner after fixing the duty liability.

2. Imposition of Penalties on High Sea Sellers:
The Tribunal examined the imposition of penalties under Rule 26 of the Central Excise Rules on High Sea Sellers. The contention was that the goods sold on high seas were imported and not excisable, thus beyond the purview of Rule 26. The Tribunal found that the goods on high seas cannot be held liable to confiscation under Rule 25 of the Central Excise Rules, as they were not yet imported under the Customs Act. Therefore, the question of imposing penalties under Rule 26 on High Sea Sellers did not arise, and the penalties were set aside.

3. Imposition of Penalties on Indigenous Suppliers:
The Tribunal upheld the penalties imposed on indigenous suppliers who sent only duty-paying documents while selling raw materials in the open market, facilitating fraudulent Cenvat credit claims. The Tribunal found substantial evidence and confessions indicating the suppliers' awareness of the fraudulent activities. The Tribunal denied the contention of the suppliers that they were unaware of the misuse of invoices and concluded that the suppliers did not take reasonable steps to ensure the goods were consigned to the appellants' addresses. The penalties under Rule 26 were upheld, except for M/s Mini Sarvodyog, whose case was remanded due to non-receipt of the SCN or the impugned order.

4. Imposition of Penalties on Central Excise Officers:
The Tribunal considered the charges against Central Excise Officers for allegedly allowing the substitution of samples, facilitating fraudulent DEPB claims. It found that the evidence against the officers was insufficient to sustain the charges, as only one officer admitted to the misconduct, and there was no concrete evidence against the others. The Tribunal noted that the officers followed the correct sampling procedure, and the complicity of the officers was not established beyond doubt. Additionally, the Tribunal upheld the legal protection under Section 155 (2) of the Customs Act and Section 40 of the Central Excise Act, which was not adhered to by the Revenue. Consequently, the penalties against the officers were set aside.

5. Imposition of Penalties on Brokers:
The Tribunal reviewed the penalty imposed on a broker for his involvement in transactions where goods were not delivered to the consignees but sold in the open market. The broker had confessed to receiving brokerage for such deals. However, the Tribunal found that in some cases, the transactions were conducted through another broker, and no confession was made by the appellant. The Tribunal concluded that the penalty of Rs. 11 lakhs was excessive and reduced it to Rs. 4 lakhs.

6. Departmental Appeals Regarding Penalties and Duty Confirmation:
The Tribunal addressed the departmental appeals concerning non-imposition of penalties under Section 114A on DEPB holders, non-confirmation of duty against M/s Corporate Chemicals and Intermediates, and incorrect duty confirmation against M/s Cosmos Chemicals and Intermediates. These appeals were remanded to the Commissioner for fresh adjudication. Additionally, the Tribunal ordered the increase of the mandatory penalty on M/s Advance Packaging Pvt. Ltd. to Rs. 10,000.

Final Order:
1. Confiscation and duty demand issues remanded to the Commissioner for fresh adjudication.
2. Penalties against High Sea Sellers set aside.
3. Penalties against Indigenous Suppliers upheld, except for M/s Mini Sarvodyog, whose case was remanded.
4. Penalties against Central Excise Officers set aside.
5. Penalty against the broker reduced from Rs. 11 lakhs to Rs. 4 lakhs.
6. Departmental appeals remanded for fresh adjudication.

Conclusion:
The Tribunal provided a detailed and structured judgment addressing the fraudulent claims of export incentive schemes and the associated penalties, ensuring adherence to legal principles and natural justice.

← Previous Next →