2020 (2) TMI 1083 - AT - Customs

Imposition of penalty u/s 114 of CA - Involvement of appellants / persons in the claiming higher Duty Drawback by the exporter - Valuation of export goods - Mens 100% Cotton Knitted T Shirts - rejection of declared value - duty drawback - Section 76(1)(b) of the Customs Act, 1962. HELD THAT - It is quite evident that neither in Show Cause Notice nor adjudication a finding has been recorded that these person were in knowledge of the export fraud being committed by the other co-noticees. CHA has admitted that it was responsible for undertaking the work of custom assessment and physical examination in docks. These are the functions that are to be attended by the CHA in normal course of his business. Similar M/s Panorama Express Agencies was in business of freight forwarding and cargo movement for his client. Nothing has been brought on record by which it can be shown that they had the knowledge of fraud being committed by the exporters by mis-declaring the value - Without bringing on record any evidence to show that these persons have acted beyond their normal business requirements or had the knowledge of the fraud being committed, they cannot be held liable for aiding or abetting the fraud. Thus the penalty imposed under Section 114(i) and 114(iii) is not maintainable. Similar issue decided in the case of FREIGHTWINGS AND TRAVELS LTD, DASHRATHLAL BHAGWANDAS GUPTA VERSUS COMMISSIONER OF CUSTOMS (EXPORT) ACC, MUMBAI 2017 (4) TMI 259 - CESTAT MUMBAI where it was held that Mere filing of bills or presentation of goods that were found to be liable to confiscation does not constitute act or omission referred to in section 114 because these are procedural requirements. None of the statements establish that the appellants were aware or participated in the procurement, packing or transportation of the goods. Appeal allowed - decided in favor of appellant.

Issues Involved:
1. Jurisdiction of DRI officers to issue Show Cause Notice.
2. Mis-declaration of FOB and PMV values for export goods.
3. Denial of duty drawback claims.
4. Confiscation of goods and imposition of penalties.
5. Role and liability of CHA and freight forwarders in aiding and abetting the fraud.

Detailed Analysis:

1. Jurisdiction of DRI Officers to Issue Show Cause Notice:
The appellant in Appeal No C/437/2012 raised the issue of the jurisdiction of DRI officers to issue the Show Cause Notice. This issue was settled by the Hon’ble Bombay High Court in the case of Sunil Gupta [2015 (315) ELT 167 (Bom)], which held that DRI officers have the jurisdiction to issue Show Cause Notices. The appellant did not appear for hearings thereafter, leading to the dismissal of the appeal for non-prosecution in terms of Rule 20 of Custom Excise Service Tax Appellate Tribunal Procedure Rules, 1982.

2. Mis-declaration of FOB and PMV Values:
The Commissioner rejected the declared FOB value of ?338.25 per piece and re-determined it as ?35/- per piece, and similarly, the declared PMV of ?120/- per piece was re-determined as ?28.53 per piece. Investigations revealed that the actual market price of the goods was significantly lower than the declared values, indicating an attempt to defraud the exchequer by claiming higher duty drawbacks.

3. Denial of Duty Drawback Claims:
The Commissioner denied the drawback claim of ?4,30,254/- as the PMV of the goods was less than the drawback due on the declared value. The investigation found that the appellants conspired to claim ineligible duty drawback based on manipulated documents showing exaggerated export prices.

4. Confiscation of Goods and Imposition of Penalties:
The Commissioner confiscated 12,000 pieces of Men's 100% Cotton Knitted T-Shirts under Section 113(d) and 113(j) of the Customs Act, 1962, and gave an option to redeem the confiscated goods on payment of a redemption fine of ?2,00,000/-. Penalties of ?4,20,000/- each were imposed on M/s Aum International and its proprietor, Shri Ajay Verma, Shri Nirmal Agarwal, Shri Gyan B Sharma (Partner of Vinayak Shipping), and Shri Rashid Y Shaikh (Proprietor of Panorama Express) under Section 114(i) and 114(iii) of the Customs Act, 1962.

5. Role and Liability of CHA and Freight Forwarders:
The Commissioner held that Shri Gyan B Sharma, by lending his CHA License to Shri Rashid Shaikh, and Shri Rashid Y Shaikh, by dealing with the export consignments knowing the misdeclaration, aided and abetted the export fraud. However, the Tribunal found no evidence that these individuals had knowledge of the fraud being committed by the exporters. It was determined that their actions were within the scope of their normal business requirements and not beyond, thus the penalties imposed under Section 114(i) and 114(iii) were not maintainable.

Conclusion:
- Appeal No C/437/2012 by Shri Nirmal Agarwal was dismissed for non-prosecution.
- Appeal No C/438/2012 by Shri Ajay Verma, Proprietor M/s Aum International, was dismissed for non-prosecution.
- Appeal No C/454/2012 by Shri Gyan B Sharma, Partner M/s Vinayak Shipping, was allowed.
- Appeal No C/459/2012 by Shri Rashid Y Shaikh, Proprietor M/s Panorama Express, was allowed.

The Tribunal concluded that without evidence showing the appellants' knowledge of the fraud, penalties under Section 114(i) and 114(iii) were not justified.

← Previous Next →