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2021 (12) TMI 294 - AT - CustomsLevy of penalty u/s 112(a) of the Customs Act on the exporter company (appellant), registered in Dubai - mal-practices in India through their Agent located in India and working for them in India - rejection of transaction value and re-valuing the same as per the actual value - HELD THAT - The charge of aiding and abetting have been established against the appellant company. Further it is found that the appellant company, though it was registered having Head Office in Dubai, but it was very much present in India through its Indian Representative - Sh. Prakash Menon. It is further found that through its Indian Representative, the appellant company have actively colluded and abetted with the Indian importers by various acts of commission and accordingly penalty has been rightly imposed under Section 112(a) of the Act. The facts before the Hon‟ble Supreme Court in the ruling of M/S CANON INDIA PRIVATE LIMITED VERSUS COMMISSIONER OF CUSTOMS 2021 (3) TMI 384 - SUPREME COURT are very different, inasmuch as there was no case of fraud and the original Bill of Entry was assessed on first check basis. Wherein in the present case there is admitted case of collusion and forgery plus concoction of documents, including presenting and filing of false and incorrect documents (invoice), to evade Customs duty by the importer and the appellant company. Further, the present proceedings are for imposition of penalty and not for demand of duty under Section 28(4). The show cause notice on this appellant is not under Section 28(4) of the Customs Act. Fraud vitiates everything. Appeal dismissed - decided against appellant.
Issues Involved:
1. Imposition of penalty under Section 112(a) of the Customs Act, 1962 on the exporter company registered in Dubai. 2. Allegations of under-invoicing and mis-declaration of transaction value and Retail Sale Price (RSP) by the importer. 3. Jurisdiction of the Customs Act, 1962 over foreign entities. 4. Settlement of disputes by the importer before the Settlement Commission and its implications on co-noticees. 5. Authority of the Directorate of Revenue Intelligence (DRI) to issue show cause notices. Issue-wise Detailed Analysis: 1. Imposition of Penalty under Section 112(a) of the Customs Act, 1962 on the Exporter Company Registered in Dubai: The Tribunal examined whether the penalty under Section 112(a) of the Customs Act was rightly imposed on the exporter company for malpractices in India through their agent. The investigation revealed that the exporter company colluded with Indian importers to evade customs duty by under-invoicing and mis-declaring the value and RSP of goods. The company issued two sets of invoices—one with a lower value for customs clearance and another with the actual value for settling accounts. The differential amount was collected in cash through their Indian representative, Prakash Menon. The Tribunal found that the exporter company actively participated in the conspiracy and abetted the importers in evading customs duty, thus attracting the penalty under Section 112(a). 2. Allegations of Under-invoicing and Mis-declaration of Transaction Value and RSP by the Importer: The investigation revealed that M/s S.R. International (SRI) conspired with overseas suppliers to import confectionary items by mis-declaring the value and RSP of the goods. The importers submitted lower value invoices to customs while settling accounts based on higher value invoices. The differential amount was paid in cash to the Indian representative of the exporter. The Tribunal noted that the importers admitted to undervaluing the goods by 65% to 75% of the actual value, leading to short payment of customs duty. The goods were also not affixed with the correct RSP, violating the Legal Metrology (Packaged Commodities) Rules, 2011, rendering them liable for confiscation under Section 111(d) of the Customs Act. 3. Jurisdiction of the Customs Act, 1962 over Foreign Entities: The appellant argued that the Customs Act, 1962, did not have extra-territorial jurisdiction and that no penalty could be imposed on them. However, the Tribunal held that the appellant was present in India through their representative, Prakash Menon, and actively participated in the evasion of customs duty. The Tribunal referred to Section 147(3) of the Customs Act, which deems an agent to be the owner, importer, or exporter for the purposes of the Act, including liability. Thus, the penalty was rightly imposed on the foreign company through their Indian representative. 4. Settlement of Disputes by the Importer before the Settlement Commission and its Implications on Co-noticees: The appellant contended that since the importer, M/s SRI, settled the dispute before the Settlement Commission, the case against them should also be deemed settled. They relied on the Tribunal's ruling in S.K. Colombowala, which held that once a case is settled before the Settlement Commission, it is settled in its entirety against all co-noticees. However, the Tribunal found that the appellant's case involved active collusion and abetment in evading customs duty, distinguishing it from the cited rulings. Therefore, the penalty on the appellant was upheld. 5. Authority of the Directorate of Revenue Intelligence (DRI) to Issue Show Cause Notices: The appellant argued that the show cause notices issued by the DRI were invalid as the DRI officers were not the proper officers under the Customs Act. They relied on the Supreme Court's ruling in Canon India Pvt. Ltd., which held that only the jurisdictional officer who assessed the goods could issue show cause notices. However, the Tribunal distinguished the present case, noting that it involved fraud, collusion, and forgery, and the proceedings were for imposing a penalty, not for demanding duty under Section 28(4). The Tribunal upheld the validity of the show cause notices issued by the DRI. Conclusion: The Tribunal dismissed the appeals, upholding the imposition of penalties on the exporter company under Section 112(a) of the Customs Act, 1962, for their active role in colluding with Indian importers to evade customs duty. The Tribunal found that the Customs Act had jurisdiction over the foreign company through their Indian representative and that the show cause notices issued by the DRI were valid. The appeals were dismissed, and the penalties were upheld.
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