2020 (9) TMI 387 - AT - Customs

Imposition of penalty u/s 114 AA of Customs Act for abatement - Textile Broker - over invoicing of export consignments of dyed and printed polyester fabrics with intention to fraudulently avail undue export benefits (DEPB) - allegation that appellant facilatated in inflating the FOB value for the purpose of wrongly claiming higher DEPB benefits - rejection of FOB value - re-determination at the lower value and the actual DEPB benefit. HELD THAT - This appellant in the course of investigation, wherein documents including cheque books etc. were found with respect to 11 firms/companies and cash of ₹ 7,50,000/- was found and seized. This appellant admitted that all these companies/firms wherein other persons namely Shri Gopal Sharma Shri Ramesh Kumar, Shri Parveen Aggarwal, Shri Mahender Kumar etc. were partner/Director/proprietor have admitted that they are only the name lenders and the actual owner/Manager of these firms/companies is the present appellant - Shri Deepak Goel. Those persons whose name is appearing as proprietor/Director also stated that they were working on a monthly salary of ₹ 3000/- to 12,000/-, doing and working for Shri Deepak Goel as per his instructions. They also stated that Shri Deepak Goel was doing transaction in these firms and companies. Further this appellant had also stated that they were engaged in raising inflated bills for the supply of fabric to M/s J.S. Designer Ltd. and were returning the differential amount in cash to Shri Vikas Mohan Singhal. Further, although Shri Deepak Goel have subsequently denied raising inflated bills for supply of fabric, but the facts are proved on the corroborative evidence being seizure of documents including cheque books etc of various firms and companies, wherein benamidar of this appellant were proprietor/partners/Directors and such benamidar persons have also admitted that they were only the name lenders engaged on salary basis, and such firm/companies were managed by Shri Deepak Goel. Admittedly, as per facts on record such firms and companies were raising inflated bills for the supply of fabric to M/s J.S. Designer Ltd. Thus, it is found that this appellant have facilitated the main accused M/s J.S. Designer Ltd. and its Directors in inflating FOB value of goods for export, by justifying the cost, indirectly - As this appellant have not directly facilitated M/s J.S. Designer Ltd. and its Directors, but have indirectly facilitated them in inflating the FOB value for the purpose of wrongly claiming higher DEPB benefits, taking a liberal view, the penalty reduced from ₹ 25 lakhs to ₹ 7,50,000/-. Appeal allowed in part.

Issues Involved:
1. Imposition of penalty under Section 114AA of the Customs Act.
2. Allegations of over-invoicing and fraudulent export benefits.
3. Role and involvement of the appellant in the alleged fraud.
4. Examination of evidence and cross-examination of witnesses.
5. Rejection and re-determination of FOB value.
6. Proportionality of the penalty imposed.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 114AA of the Customs Act:
The appellant, a broker in the textile cloth market, was penalized with ?25 lakhs under Section 114AA of the Customs Act. The penalty was imposed due to the appellant's alleged involvement in facilitating over-invoicing by M/s J.S. Designer Ltd., thereby enabling fraudulent export benefits.

2. Allegations of Over-invoicing and Fraudulent Export Benefits:
The intelligence received by the department indicated that M/s J.S. Designer Ltd. was over-invoicing export consignments of dyed and printed polyester fabrics to fraudulently avail undue export benefits (DEPB). The goods under three shipping bills were found to be highly overvalued upon examination and were provisionally released under bond and bank guarantee.

3. Role and Involvement of the Appellant in the Alleged Fraud:
The appellant, Deepak Goel, admitted to being a broker and managing several firms and companies that issued inflated bills for fabric supplies to M/s J.S. Designer Ltd. The appellant was found to have facilitated the main accused in inflating the FOB value of goods for export by justifying the cost indirectly. The appellant's involvement was corroborated by the seizure of documents, cheque books, and statements from various individuals who admitted to being name lenders for the appellant's firms.

4. Examination of Evidence and Cross-examination of Witnesses:
The case involved extensive cross-examination of various witnesses, including suppliers, directors, and cost accountants. Statements from individuals like Shri Vikas Mohan Singhal, Shri Chander Gauba, and others were recorded, revealing the modus operandi of over-invoicing and the role of the appellant in managing multiple firms to facilitate the fraud.

5. Rejection and Re-determination of FOB Value:
The show cause notice proposed the rejection of the declared FOB value of ?35,64,32,668/- and re-determined it at ?5,38,89,807/-. The Principal Commissioner upheld the rejection and re-determination of the FOB value, thereby revising the DEPB benefits accordingly.

6. Proportionality of the Penalty Imposed:
The appellant contested the penalty, arguing that the impugned order violated principles of natural justice and was practically ex-parte. The appellant claimed that the goods were supplied in the course of wholesale trade and that the role was limited to ensuring supply. The Tribunal, considering the appellant's indirect facilitation and corroborative evidence, reduced the penalty from ?25 lakhs to ?7,50,000/-.

Conclusion:
The Tribunal found that the appellant indirectly facilitated the main accused in inflating the FOB value for fraudulent DEPB benefits. However, taking a liberal view, the penalty was reduced to ?7,50,000/-. The appellant was entitled to consequential benefits in accordance with the law. The judgment was pronounced in court on 10.09.2020.

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