2018 (10) TMI 574 - HC - Customs

Penalty u/s 114AA of the Customs Act, 1962 - provision was inserted in the statute book w.e.f. 13.07.2006 - levy of penalty for the period prior to insertion of statute - Manipulation of bills of entry to later the date - It was emphasized in this regard that the Bills of Entry (BoE) were initially filed in 2005; for its own convenience, the Customs authorities asked them to split the same into 14 bills which Atlas did in 2006. Held that - Although, the BoE which signifies the importation of goods and the official record thereof undoubtedly occurred in 2005, the occasion for the DRI to investigate the genuineness of the transaction arose when the appellant sought to re-export the goods to a company which did not exist. In that sense, it was not the original importation but rather re-attempted importation upon its failure to clear the goods on account of apparently factors beyond its control. The reexport application made sometime in 2007 and the order, which was issued upon it, in the opinion of this court, constituted attempts that were successful on the appellant s part to claim a fraudulent or otherwise fictitious transaction, to be genuine - the imposition of penalty, which was in respect of the facts that took place after 13.07.2006, was justified. Appeal dismissed - decided against appellant.

Issues:
1. Imposition of penalty under Section 114AA of the Customs Act, 1962.
2. Legality of penalty imposition post insertion of Section 114AA.
3. Circumstances leading to the penalty imposition.
4. Applicability of penalty provisions to the case.
5. Validity of re-export application and subsequent actions.

Analysis:

1. Imposition of penalty under Section 114AA: The appellant, an assessee/importer, challenged the imposition of penalty under Section 114AA of the Customs Act, 1962, contending it was unwarranted and illegal. The penalty was imposed in relation to a transaction involving the importation of goods from a Chinese supplier to fulfill obligations with a franchisee, which ran into trouble with the consignment not being released due to a dispute. The Directorate of Revenue Intelligence (DRI) suspected the transaction's genuineness, leading to the imposition of penalties.

2. Legality of penalty imposition post insertion of Section 114AA: The appellant argued that the cause for imposing the penalty occurred before the insertion of Section 114AA, making the concurrent imposition of penalties unlawful. While the importation of goods and official records happened in 2005, the investigation into the transaction's genuineness arose when the appellant attempted to re-export the goods to a non-existent company, indicating a fraudulent transaction. The court found that the penalty imposition, based on events post 13.07.2006, was justified due to the appellant's actions.

3. Circumstances leading to the penalty imposition: The appellant's request for re-export, following the failed clearance of goods due to disputes, was seen as an attempt to claim a fictitious transaction as genuine. Despite the Commissioner granting the LET Order, the court concluded that the re-export application and subsequent actions aimed to establish a fraudulent transaction as legitimate, justifying the penalty imposition.

4. Applicability of penalty provisions to the case: The court emphasized that the penalty imposition was based on events that occurred after the insertion of Section 114AA, indicating that the penalties were rightfully applied considering the circumstances surrounding the re-export application and the attempt to validate a questionable transaction.

5. Validity of re-export application and subsequent actions: The court dismissed the appellant's appeal, stating that no question of law arose in the case. The judgment affirmed the legality of the penalty imposition under Section 114AA, highlighting the appellant's actions in attempting to re-export goods to a non-existent company as a basis for justifying the penalties imposed.

This detailed analysis reflects the court's assessment of the issues raised regarding the penalty imposition under Section 114AA of the Customs Act, 1962, and the circumstances leading to the penalty imposition in the case at hand.

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