2018 (9) TMI 512 - AT - Customs

Quantum of penalty - appellant was allegedly involved in the export of sub-standard garments, with inflated FOB values, with the intention of claiming undue drawback - Held that - From the record there is nothing to suggest that the appellant was aware of the over- valuation of the goods, with the intention of claiming fraudulent drawback. Lower Authority has recorded that he was very much aware of the unnecessary exercise of transportation of goods from Uran to ICD Dhannadh and back to the Nhava Sheva. The knowledge of this suspicious act along with act of preparing export invoices has been used to justify the penalty imposed on him. The main conspirators, in the case i.e. Shri Kirit Sharimankar and Shri Ajay Mishra were directly involved in this fraudulent export. The only benefit received by the appellant is in the form of certain payments of ₹ 3000 per container for the role played by him - the penalty imposed on the appellant on the higher side and is reduced from ₹ 5 Lakh to ₹ 1 Lakh, in the interest of justice - appeal allowed in part.

Summary

Issues:
Reduction of penalty on appellant involved in fraudulent export transactions.

Analysis:
The appellant, Shri Sanjay Kundra, challenged the penalty imposed on him for his role in fraudulent export activities involving sub-standard garments with inflated FOB values. The Customs Department investigated a consignment in a container and found discrepancies leading to penalties on all involved parties. The appellant acted as a freight forwarder and prepared export invoices based on instructions, but claimed ignorance of the over-valuation scheme. The penalty was reduced from ?10 lakh to ?5 lakh by the Commissioner (Appeals).

The appellant argued that the penalty was excessive considering his limited role as a freight forwarder and invoice preparer, not the CHA for the shipping bills. He contended that he was unaware of the fraudulent scheme and should not be penalized disproportionately. The appellant's counsel cited case laws to support his argument that the penalty was unreasonable given the appellant's lack of knowledge about the over-valuation.

The Department justified the penalty, emphasizing the appellant's involvement in the fraudulent transactions based on specific findings in the impugned order. It highlighted the appellant's awareness of suspicious activities like unnecessary transportation of goods, indicating his complicity in the scheme.

Upon reviewing the case, the Tribunal noted that the main conspirators were directly involved in the fraudulent export, while the appellant received minimal benefits for his role. Considering the circumstances, the penalty on the appellant was deemed excessive and reduced from ?5 lakh to ?1 lakh in the interest of justice. The Tribunal found that the appellant's involvement was limited, and the penalty imposed needed to be proportionate to his role in the fraudulent export scheme.

In conclusion, the Tribunal modified the impugned order, reducing the penalty on the appellant from ?5 lakh to ?1 lakh, taking into account his lesser role and the actions of the main conspirators in the fraudulent export transactions.