2009 (2) TMI 3 - SC - Customs

Under-valuation of imported goods - evidence on record clearly established the undervaluation penalty u/s 112(a) imposed on MD and Director of company - penalty u/s 114A imposed on company - stand taken that even before issue of SCN a sum of Rs.25 lakhs was paid is not a mitigating circumstance - appeal filed by the company is without merit and is dismissed - it cannot be said that the quantum of penalty imposed suffers from any infirmity appeal filed by MD and Director is also dismissed

Summary

Issues Involved:
1. Under-valuation of imported goods.
2. Seizure of incriminating documents.
3. Statements recorded under Section 108 of the Customs Act.
4. Allegations of conspiracy to evade customs duty.
5. Imposition of penalties under Sections 112(a) and 114A of the Customs Act.
6. Discretion in the imposition of penalties.
7. Payment of differential duty and interest.

Detailed Analysis:

1. Under-valuation of Imported Goods:
The Customs, Excise and Service Tax Appellate Tribunal (CESTAT) dealt with appeals concerning under-valuation of imported goods by the appellants. The DRI Officers received intelligence regarding this under-valuation, leading to searches and seizures of incriminating documents from business and residential premises.

2. Seizure of Incriminating Documents:
Incriminating documents were seized during searches at the premises of the concerned parties. These documents included manipulated invoices and communications indicating the under-valuation of goods imported from Veneta Cucine of Italy through a front company, Proma SRL.

3. Statements Recorded under Section 108 of the Customs Act:
Statements were recorded under Section 108 of the Customs Act from various individuals, including the Managing Director of the appellant company and other key personnel. These statements revealed the modus operandi of under-valuing the imports to evade customs duty.

4. Allegations of Conspiracy to Evade Customs Duty:
The investigation revealed that the appellants conspired to undervalue their imports to increase profits. They prepared manipulated invoices through Proma SRL, a front company, and presented these invoices to customs officials, showing substantially lower prices than the actual prices charged by Veneta Cucine.

5. Imposition of Penalties under Sections 112(a) and 114A of the Customs Act:
The CESTAT upheld the imposition of penalties under Sections 112(a) and 114A of the Customs Act. The penalties were imposed on the company and key individuals involved in the conspiracy. The tribunal noted that there was clear evidence of under-valuation and the involvement of key personnel in the nefarious activities.

6. Discretion in the Imposition of Penalties:
The appellants argued that the penalties were imposed under duress and that they had received substantial discounts from the overseas suppliers, which justified the lower prices in the invoices. However, the tribunal found these arguments unconvincing and upheld the penalties, noting that the statements and evidence clearly established the under-valuation.

7. Payment of Differential Duty and Interest:
The appellants had paid a sum of Rs.25 lakhs before the issuance of the show cause notice, claiming it as a bona fide attempt to settle the matter. However, the tribunal noted that this amount did not cover the entire differential duty and was not a mitigating circumstance. The differential duty was to be paid along with interest, and the penalties were upheld.

Conclusion:
The Supreme Court dismissed the appeals, upholding the CESTAT's decision. The court found no merit in the arguments presented by the appellants and confirmed the penalties imposed under Sections 112(a) and 114A of the Customs Act. The appeals filed by the company and the Managing Director were dismissed, with no order as to costs.