2022 (7) TMI 371 - AT - Customs

Confiscation of goods - levy of penalty - export of Rice - misdeclaration of goods or not - the case of the department is that M/s Janki Dass Rice Mills had filed the Shipping Bills/Export documents for export of goods i.e. Rice to Iran but the goods were delivered at UAE - admissibility of statements - levy of penalty on co-appellant - HELD THAT - The remittance was received in Indian Rupees from Iran instead of free convertible foreign currency. Thus, there appeared to be mis-declaration on part of Appellant. The revenue in support of allegations relied upon the statements of Director, CHAs and the officials of Shipping Lines. However, these persons were not examined in the adjudication proceedings even after the request of Appellant and as such their statements are not admissible as evidence under the provisions of Section138B of Customs Act, which provides that - if an authority in any proceedings under the Act wants to rely upon the statement of any person (made during enquiry), such person is required to be examined as witness and if the adjudicating authority finds the evidence of the witness admissible , then such witness should be offered for cross-examination and only thereafter the evidence is admissible. In absence of compliance of the provision of Section138B of the Act, the statements are not admissible as evidence. The rejection of cross-examination in the impugned matter tantamount to violation of principles of natural justice. Request for cross-examination has been denied and the witnesses have not been examined despite specific reliance by the appellant on Section138B. The Hon ble Madras High Court in the case of M/S VEETRAG ENTERPRISES, CHETAN KUMAR RANKA, NIRMAL KUMAR LUNKAD VERSUS THE COMMISSIONER OF CUSTOMS (SEAPORT EXPORTS) 2015 (8) TMI 781 - MADRAS HIGH COURT has observed that attitude of the respondent shows that the petitioner was not given fair opportunity to defend their case, therefore, not providing an opportunity to cross-examine the above said eight witnesses, in my view, would violate the principles of natural justice. Accordingly, the impugned order is set aside and the respondent is directed to permit the petitioner to cross-examine the above said eight witnesses and pass appropriate orders on merits and in accordance with law. In the present matter all the documents in respect of disputed consignments were in the name of Iranian buyers. There is nothing on record to show that the said documents were amended at any stage so as to permit import of goods at UAE. Further Revenue nowhere produced any documentary evidence to show that the exports documents produced by the Appellant were false and fabricated - once all the export documents were in the name of Iranian buyers there was no scope for clearance of the goods in UAE and its subsequent sale. Further department nowhere disputed the foreign remittance of impugned consignments in Indian Rupees from Iran. It is further observed that in this case the only allegation and finding against Appellant is that they had violated para 2.53 of the FTP i.e. to say that since according to the Customs the goods were actually exported to UAE, the payments should have been received in convertible foreign exchange. The whole case revolves around irregularities in respect of receipt of currency with regard to exported goods. It is found that these violations relate to post export conditions. There is no doubt that any violation relating to foreign exchange are covered under FEMA, 1999 and not under the Customs Act - It is a well settled law that in respect of alleged violation of foreign exchange, it is the erstwhile FERA authorities or FEMA authorities who are competent to initiate the proceedings against the party. Levy of penalty on co-appellants - HELD THAT - The act of filing the export documents for customs clearances shows that the appellants have no mens rea and filed the documents being a bona fide facilitators.Further, in any event of the matter, since we have already held that the goods were ultimately delivered to the buyers at Iran, there is no justification for imposing penalty upon the appellants, therefore, the penalty imposed on the all the co-appellants is set aside. All the appeals filed by the Appellants are allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Alleged violation of Foreign Trade Policy (FTP) provisions.
2. Admissibility of statements under Section 138B of the Customs Act, 1962.
3. Responsibility and liability of the exporter once goods are shipped.
4. Documentary evidence supporting the export to Iran.
5. Jurisdiction of Customs authorities concerning alleged violations of FEMA and FTP.
6. Role and liability of Customs House Agents (CHA) and clearing agencies.

Issue-wise Detailed Analysis:

1. Alleged Violation of Foreign Trade Policy (FTP) Provisions:
The appellant, M/s Janki Dass Rice Mills, exported rice under shipping bills initially booked for Iran but delivered to the UAE, allegedly violating para 2.40 and 2.53 of the FTP. The adjudicating authority held the goods liable for confiscation under Sections 113(i) and 113(d) of the Customs Act, 1962, and imposed penalties under Sections 114 and 114AA of the Customs Act, 1962, read with Section 11(1) of the Foreign Trade (Development & Regulation) Act, 1992, and related rules.

2. Admissibility of Statements under Section 138B of the Customs Act, 1962:
The department's case relied on statements from various individuals, which were not examined during adjudication, violating Section 138B of the Customs Act. The Tribunal emphasized that for a statement to be admissible, the person must be examined as a witness and subject to cross-examination. The rejection of cross-examination requests violated principles of natural justice, rendering the statements inadmissible.

3. Responsibility and Liability of the Exporter Once Goods are Shipped:
The appellant argued that once the goods are shipped and the bill of lading is issued, the title transfers to the foreign buyer, who can then decide the port of discharge. The Tribunal agreed, noting that the exporter loses control over the goods after the 'let export order' is issued by Customs authorities. The change in the discharge port was the prerogative of the consignee, and the exporter cannot be held liable for such changes.

4. Documentary Evidence Supporting the Export to Iran:
The appellant provided various documents, including photographs, phytosanitary certificates, and Dubai Customs documents, showing the rice bags were labeled for Iran and re-exported from Dubai to Iran. The Tribunal found no evidence of document falsification or amendment and noted that the goods could not have been cleared in the UAE without proper labeling and certification. The Tribunal concluded that the goods were indeed exported to Iran, supported by documentary evidence.

5. Jurisdiction of Customs Authorities Concerning Alleged Violations of FEMA and FTP:
The Tribunal highlighted that any violation related to foreign exchange falls under the jurisdiction of FEMA authorities, not Customs. The alleged violation of para 2.53 of the FTP, concerning receipt of currency, relates to post-export conditions and does not fall under the Customs Act. The Tribunal cited previous judgments, reinforcing that only FEMA authorities or designated authorities under the Foreign Trade (Development & Regulation) Act can adjudicate such violations.

6. Role and Liability of Customs House Agents (CHA) and Clearing Agencies:
The CHA, M/s V. Arjoon, and the clearing agency, M/s Venus, argued they acted based on documents provided by the exporter and had no malafide intent. The Tribunal found no evidence of misdeclaration by the CHA or clearing agency and noted their bona fide actions in filing export documents. Consequently, the Tribunal set aside the penalties imposed on them.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals), allowing the appeals filed by the appellants with consequential relief. The Tribunal emphasized the importance of adhering to principles of natural justice and the proper jurisdictional authority in adjudicating alleged violations.