2017 (8) TMI 499 - AT - Customs

Valuation - Import and re-export of garments (night wear) - It appeared that the importer had made an attempt to import goods of inferior quality, of Indian origin, into India and re-export the same to Russia in contravention of the provisions of the Customs Act, 1962 - hawala transactions - Held that - Every country including India, consistently encourages exports. With the intention of export promotion, Government has put in place various incentives to exporters like drawback, rebate, DEPB etc. But by no stretch of imagination can it be considered that the Government, or for that matter the legislature, would facilitate or support exports of inferior quality goods at highly over inflated values. Perpetrators of such modus operandi have dubious intentions behind their actions, namely, to fraudulently claim ineligible drawback or other export incentives or even for the purpose of money laundering or hawala transactions. There can be no doubt that such attempts to defraud should be meted out with the adverse legal consequences that have been put in place. It has been proved beyond doubt that the alleged import and further onward attempt to re-export to Russia by manipulating/ fabricating the import documents and the value is very much in contravention of the provisions of Customs Act, 1962. This being the case, we are unable to find any infirmity with the decision of the adjudicating authority interalia, that of ordering re-fixing of the declared assessable value to ₹ 15,31,994/-, ordering confiscation of the goods, allowing redemption on payment of fine of ₹ 3,82,000/- after payment of appropriate duty along with interest thereon, as also imposition of penalties under various provisions of the Customs Act, 1962. Appeal dismissed - decided against appellant.

Summary

Issues:
1. Import and re-export of goods of inferior quality.
2. Allegations of inflating the value of goods for illegal foreign exchange.
3. Confiscation of goods under the Customs Act, 1962.
4. Adjudication of penalty and fine under various provisions of the Customs Act.

Analysis:

Issue 1: Import and re-export of goods of inferior quality
The case involved M/s. Vishal Exports Overseas Ltd. importing ladies nightwear of inferior quality from Dubai to India and attempting to re-export the same to Russia. The goods were found to be of Indian origin, of poor quality, and not suitable for wearing. The importer's attempt to import and re-export such goods was deemed to be in violation of the Customs Act, 1962.

Issue 2: Allegations of inflating the value of goods for illegal foreign exchange
The department alleged that the value of the goods imported by M/s. Vishal Exports Overseas Ltd. was inflated to facilitate illegal foreign exchange transactions amounting to Rs. Two crores. The appellant contested these allegations, arguing that they had made several similar imports for re-export to Russia and were regular exporters of readymade garments. The department's investigations revealed discrepancies in the declared values of the goods, leading to suspicions of fraudulent activities.

Issue 3: Confiscation of goods under the Customs Act, 1962
The appellate tribunal considered whether the impugned goods were confiscable under the Customs Act, 1962. It was established that the goods were originally imported from India by another entity and then re-exported from Dubai to India for inflated values. The tribunal found that the actions of the importer in manipulating the import documents and values were in contravention of the Customs Act, justifying the confiscation of the goods and imposition of penalties.

Issue 4: Adjudication of penalty and fine under various provisions of the Customs Act
The Commissioner (Appeals) had confirmed the demand of duty, ordered confiscation of goods, and imposed penalties on M/s. Vishal Exports Overseas Ltd. The tribunal upheld the decision, emphasizing that attempts to defraud the system by inflating values for exports of inferior quality goods should be met with adverse legal consequences. The tribunal dismissed the appeal, affirming the penalties and fines imposed by the adjudicating authority.

In conclusion, the appellate tribunal upheld the decision to confiscate the goods, re-fix the assessable value, and impose penalties on M/s. Vishal Exports Overseas Ltd. for their actions in importing and attempting to re-export goods of inferior quality with inflated values, in violation of the Customs Act, 1962.