2017 (2) TMI 963 - AT - Customs

Diversion of imported goods at concessional rate for use in manufacture of export goods - Clandestine removal - misdeclaration of export goods - Imposition of fines and penalties against M/s Jabs International, its director Shri Bhaskar Shah and M/s Gandhi Associates - Held that - when M/s Jabs International or Shri Bhaskar Shah were not involved in any of the exports nor prepared any documents misdeclaring the export goods, in that case they cannot be saddled with any charges of misdeclaration - Moreover we find that except 15 export consignments which were exported by Appellants through M/s Aroma International, the Appellant were not even remotely concerned with remaining export whereas the fine and penalties has been imposed against them on all such exports which is absolutely illegal. Even the export bills submitted by them to the Bank for the purpose of discounting of export bills also contain the description of export goods as Chilli Powder. Thus in such a case the charges of misdeclaration against the Appellants cannot be made against Appellant. To bring home the charges of mis-declaration it is required that such mis-declaration was done by the person for export of goods. We find that in export of goods, M/s Jabs International or Shri Bharat Shah had no role to play. The export of goods took place from the factory of M/s Aroma International under the supervision of the jurisdictional officers of said EOU and the appellants were at no stage involved in exports. The Appellant came into picture only at the time of discounting of bills and at that stage also no misdeclared documents were filed. In such case we are of the view that the allegation of mis-declaration of export goods against M/s Jabs International or Shri Bhaskar Shah are not sustainable. In view of our observations we thus hold that the redemption fine against the Appellant under section 125 of the Customs Act and penalties under Section 114 (i) and (ii) against M/s Jabs International and Shri Bhaskar Shah are not sustainable. Imposition of penalty u/s 112 (a) - Held that - neither in the show cause notice or the impugned order the role of Appellants for diversion of imported goods is forthcoming. Since the Appellant has no role in diversion of imported goods by M/s Aroma, therefore no penalty can be imposed upon the Appellant. Penalty against M/s Gandhi Associates - Held that - they had acted merely as exporter of such goods and the goods were declared by them to be Chilli Powder only. Further no evidence of misdeclaration by them is appearing on record. Their role was limited only to the extent of showing the export goods as belonging to them and get some export income. This act on their part in no ways lead to inference that they intended to misdeclare any export goods. Hence there is no reason to impose fine and penalties against them. Fine and penalty against M/s Jabs International Pvt. Ltd its director Shri Bhaskar Shah and M/s Gandhi Associates is not sustainable and is set aside - appeal allowed - decided in favor of appellants.

Summary

Issues Involved:
1. Misdeclaration of Export Goods
2. Diversion of Imported Goods
3. Imposition of Fine and Penalties

Issue-wise Detailed Analysis:

1. Misdeclaration of Export Goods:
The primary allegation was against M/s Aroma International for misdeclaring export goods as "Spices Powder" instead of "Chilli Powder" to fulfill export obligations. M/s Jabs International Pvt. Ltd. and its director Shri Bhaskar Bhanuvadan Shah were implicated for their role in discounting export bills and alleged misdeclaration in 15 consignments. The adjudicating authority imposed a fine and penalties on M/s Jabs International and Shri Bhaskar Shah for misdeclaration under Section 113(d) and 113(i) of the Customs Act, 1962, and Section 11(1) of the Foreign Trade (Development and Regulation) Act, 1962. However, it was established that M/s Jabs International and Shri Bhaskar Shah were not involved in the actual export process or the filing of shipping bills, and all their documents correctly described the goods as "Chilli Powder." The tribunal concluded that M/s Jabs International and Shri Bhaskar Shah could not be held liable for misdeclaration as they were not involved in the export documentation or misdeclaration.

2. Diversion of Imported Goods:
The adjudicating authority found that M/s Aroma International had diverted imported goods meant for export production into the local market. M/s Jabs International was penalized under Section 112(a) of the Customs Act, 1962, for alleged involvement in this diversion. However, the tribunal found no evidence linking M/s Jabs International to the diversion of imported goods by M/s Aroma International. The tribunal noted that the mere fact that Shri Piyush Meghani, a partner in M/s Aroma International, was previously a trainee at M/s Jabs International, or that M/s Jabs International helped in arranging factory premises, did not establish their involvement in the diversion of imported goods.

3. Imposition of Fine and Penalties:
The adjudicating authority imposed fines and penalties on M/s Jabs International, Shri Bhaskar Shah, and M/s Gandhi Associates for their alleged roles in the misdeclaration and diversion of goods. M/s Gandhi Associates were penalized under Section 114(i) and (ii) & 114(A) of the Customs Act for exporting goods declared as "Chilli Powder." The tribunal found no evidence of misdeclaration by M/s Gandhi Associates, who acted merely as exporters. The tribunal held that the fines and penalties imposed on M/s Jabs International, Shri Bhaskar Shah, and M/s Gandhi Associates were not sustainable as there was no evidence of their involvement in the misdeclaration or diversion of goods.

Conclusion:
The tribunal set aside the impugned order imposing fines and penalties on M/s Jabs International Pvt. Ltd., its director Shri Bhaskar Shah, and M/s Gandhi Associates. The appeals were allowed with consequential reliefs, if any. The tribunal concluded that the allegations against the appellants were not substantiated by evidence, and their involvement in the misdeclaration and diversion of goods was not proven.