2016 (5) TMI 890 - AT - Customs

Waiver of penalty - DEPB license obtained through fraudulent means were used by the various importers for importation of the goods - Confiscation of goods - Undue rebate of Central excise duty - malafide intention - Held that - the appellants have declared the manufacturer as a supporting manufacturer and the goods so procured from the so called supporting manufacturer were not manufactured by the said manufacturer. If this is so then all the material particulars mentioned in the ARE-1 and subsequently declared in the shipping bills and other documents for export, obviously, do not correspond to the goods shown to have been manufactured by the supporting manufacturer. Therefore, the appellants have knowingly committed offence as specified under Section 113(i) and made themselves liable for penalty under Section 114 of the Customs Act. Shri Rajendra Doshi, General Manager of appellant co. has admitted in his statement, that he visited the factory of M/s. Siddhi Creative, who has issued the invoices and found that M/s. Siddhi Creative did not have the manufacturing unit. Knowingly this fact, he has mis-declared the bogus ARE-1s in the shipping bills. Thus, he was indulged in entire offence committed by the appellant colluding with M/s Siddhi Creative. It is found that the equal amount of penalty was imposed each on the appellant company as well as Shri Rajendra Doshi. Taking into consideration that Shri Rajendra Doshi is an employee of the appellant company equal amount of penalty of ₹ 5,03,000/- is very harsh. Therefore, in respect of Shri Rajendra Doshi, if the penalty is reduced from ₹ 5,03,000/- to ₹ 2,00,000/- the interest of justice can be met. - Decided partly in favour of appellant

Issues: Alleged fraudulent export activities, imposition of penalties under Customs Act, liability of merchant exporter, misdeclaration of export goods, involvement of supporting manufacturer, penalty on company's General Manager.

Analysis:

1. Alleged Fraudulent Export Activities:
The case involved allegations of using bogus ARE-1s for exports to claim fraudulent Central Excise Benefits. The supporting manufacturer was found to be fictitious, with no actual manufacturing activities taking place. This led to the issuance of DEPB licenses through fraudulent means, resulting in duty-free clearance of imported goods. The goods valued at a significant amount were deemed to have been confiscated under relevant sections of the Customs Act.

2. Imposition of Penalties under Customs Act:
The penalties were imposed under Section 114 of the Customs Act for offenses falling under Section 113(d) and 113(i). Section 113(d) pertains to goods attempted to be exported contrary to any prohibition, while Section 113(i) deals with goods entered for exportation not corresponding in value or material particulars with the entry made. The penalties were upheld based on these sections.

3. Liability of Merchant Exporter:
The appellant, a merchant exporter, argued that they should not be penalized for offenses committed by the manufacturer. The appellant contended that they had purchased goods for export in good faith and had exported them without any dispute. However, the tribunal found that the appellant knowingly committed offenses by misdeclaring material particulars in export documents, making them liable for penalties.

4. Misdeclaration of Export Goods:
The tribunal noted that the appellant declared the supporting manufacturer but procured goods that were not actually manufactured by them. This misdeclaration led to discrepancies between the export documents and the actual goods exported, violating Section 113(i) of the Customs Act. As a result, penalties were deemed appropriate for the misdeclaration.

5. Involvement of Supporting Manufacturer:
The supporting manufacturer's lack of actual manufacturing activities and the issuance of bogus export documents were crucial in establishing the fraudulent scheme. The tribunal found that the appellant was well aware of the manufacturer's activities and held them responsible for the misdeclaration in the export documents.

6. Penalty on Company's General Manager:
The General Manager of the company was also penalized for colluding with the supporting manufacturer and misdeclaring export documents. While equal penalties were imposed on both the company and the General Manager, the tribunal considered the General Manager's role as an employee and reduced his penalty to ensure justice. The tribunal dismissed one appeal and partly allowed the other with reduced penalties for the General Manager.

In conclusion, the judgment upheld penalties imposed under the Customs Act on the appellant for fraudulent export activities involving misdeclaration of goods and collusion with a fictitious supporting manufacturer. The tribunal carefully considered the roles of the merchant exporter and the company's General Manager in the scheme, leading to a dismissal of one appeal and a partial allowance with reduced penalties in the other.

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