2018 (1) TMI 973 - AT - Customs

Penalty on CHA u/s 114 (iii) of CA, 1962 - It has been alleged that appellants were one of the three CHAs whose services were utilized in filing the shipping bills of the fictitious export firms allegedly floated by Shri K. Gunasekhar, S.Divakaran and his associate Shri K. Jayaraman - Misuse of Drawback Benefit - appellants have pleaded ignorance of their actions and the consequences that came about therefrom. Held that - appellant had either enabled the grant of CHA identity card to the henchmen of the main operators which enabled shipping bills to be filed or facilitated the operators by their fraudulent activity - In respect of the other appellants, notwithstanding their common protestations that they had only lent their name for starting a company, for opening bank accounts giving signed blank cheques etc., it does not appear to reason that all these appellants were babes in the wood. They surely were aware of what was happening - We therefore afraid that their arguments do not cut any ice. Litigants are expected to come with clean hands. - appellants herein certainly cannot escape penalties. Penalty though levied but reduced - Appeal allowed in part.

Issues Involved:
1. Misuse of drawback benefits by exporters.
2. Allegations against Customs House Agents (CHAs) for abetting fraudulent activities.
3. Imposition of penalties under Section 114 (iii) of the Customs Act, 1962.
4. Claims of ignorance and lack of involvement by appellants.
5. Reduction of penalties based on the facts and circumstances.

Detailed Analysis:

1. Misuse of Drawback Benefits by Exporters:
The case arose from intelligence reports indicating misuse of drawback benefits by certain exporters. Customs officers intercepted export consignments on 08.09.2005, revealing that the goods declared as "Leather shoe upper for adults" were largely torn/used/soiled shoe uppers with only a small portion being new but of inferior quality. The declared value of goods by Poppy Leather & Apparel and RG Impex was significantly inflated compared to their actual value. Further investigations revealed that 46 fictitious firms had made similar fraudulent exports to Dubai, involving a total FOB value of ?65,89,54,986/- and a drawback amount of ?5,65,91,523/-.

2. Allegations Against Customs House Agents (CHAs):
Several CHAs were implicated for their roles in facilitating the fraudulent activities. For instance, M/s. Skylark Cargo Services was penalized ?3 lakhs under Section 114 (iii) of the Customs Act for abetting the fraudulent exports by providing identity cards to unauthorized persons and handling numerous shipping bills for the main perpetrators. Similarly, other CHAs like Shri V. Devendrudu and Shri Thambi T Abraham were also penalized for their involvement in facilitating the fraudulent exports.

3. Imposition of Penalties Under Section 114 (iii) of the Customs Act, 1962:
Penalties were imposed on various appellants under Section 114 (iii) of the Customs Act for their roles in abetting the fraudulent claims of ineligible drawback. Each appellant's specific involvement was detailed, such as signing documents for opening bank accounts, obtaining IEC numbers, and signing blank cheques which were used by the main perpetrators to withdraw the fraudulent drawback amounts.

4. Claims of Ignorance and Lack of Involvement by Appellants:
The appellants argued that they were unaware of the fraudulent activities and had been deceived by the main perpetrators. For example, M/s. Skylark Cargo Services claimed that their employee had forged signatures and acted without their knowledge. Similarly, Ms. K. Ranganayaki alias Preeti Ramesh contended that she was only a namesake proprietor and had no knowledge of the fraudulent activities. However, the tribunal found these claims unconvincing, emphasizing that the appellants were aware of their actions and the consequences.

5. Reduction of Penalties Based on the Facts and Circumstances:
While the tribunal upheld the penalties, it acknowledged that the appellants did not directly benefit from the fraudulent drawback amounts. Consequently, the penalties were reduced for each appellant. For instance, the penalty for M/s. Skylark Cargo Services was reduced from ?3 lakhs to ?75,000/-, and similar reductions were made for other appellants.

Conclusion:
The tribunal concluded that the appellants could not escape penalties due to their roles in facilitating the fraudulent activities. However, considering the facts and circumstances, the penalties were reduced. The appeals were disposed of on these terms, with the order pronounced in court on 19.01.2018.

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