2022 (7) TMI 372 - AT - Customs

Misdeclaration of export goods - the case of the department is that the appellant had filed the Shipping Bills/Export documents for export of goods i.e Rice to Port Bandar Abbas (Iran) but the goods were delivered at UAE (Jabel Ali Port) - remittance was received in Indian Rupees from Iran instead of free convertible foreign currency - admissible evidences or not - levy of penalty on CHA - HELD THAT - The revenue in support of allegations rely upon the statements of Director, CHAs and the officials of Shipping Lines. However it is found that 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 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. Though the show cause notice invoked Section 113(d) and 113(i) of the Customs Act but these provisions were invoked by only alleging violation of para 2.53 of the FTP and section 8 of FEMA, 1999. We therefore hold that there was no violation of Customs Act in any manner. There is no dispute about the description of the goods, its quantity and value. The export of rice was neither prohibited nor restricted. 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. In the facts of the present case since it was only a case of alleged violation of the provisions of Foreign Trade (Development Regulation Act) and rules made there under as well as that of Foreign Exchange Management Act, the Customs authorities did not have jurisdiction to issue the show cause notice for said violation. Levy of penalty on CHA - HELD THAT - The CHA had filed shipping bills as per the documents provided to him by exporter. Therefore the bonafide act of the Appellant cannot be doubted. The act of filing the export documents for customs clearances shows that the appellant has no mens rea and filed the documents being a bona fide facilitator. 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 appellant, therefore, the penalty imposed on the appellant is set aside. All the appeals filed by the Appellants are allowed.

Issues Involved:
1. Mis-declaration of destination port and delivery of goods.
2. Admissibility of statements under Section 138B of the Customs Act.
3. Violation of principles of natural justice due to denial of cross-examination.
4. Genuineness of export documents and remittances.
5. Jurisdiction of Customs authorities in cases of alleged Foreign Trade Policy and FEMA violations.
6. Liability of the Customs House Agent (CHA).

Detailed Analysis:

1. Mis-declaration of Destination Port and Delivery of Goods:
The appellant, M/s Bansal Fine Foods Pvt. Ltd., exported rice under eight shipping bills originally booked for Iran but delivered to Jebel Ali, UAE. The adjudicating authority held that this constituted a violation of the Foreign Trade Policy (para 2.40 and 2.53) and imposed penalties under Sections 113(i), 113(d), 114, and 114AA of the Customs Act, 1962. The appellant argued that the goods, though offloaded at Jebel Ali, ultimately reached Iran, supported by remittance receipts from the Iranian consignee. The Tribunal found no evidence to show that the goods were cleared for domestic consumption in Dubai, noting that the packaging was marked in Iranian language, and UAE regulations prohibit domestic clearance of such goods.

2. Admissibility of Statements under Section 138B of the Customs Act:
The department relied on statements from various individuals, but these were not examined in the adjudication proceedings, making them inadmissible under Section 138B of the Customs Act. The Tribunal emphasized that for statements to be admissible, the individuals must be examined as witnesses, and the appellant must be given an opportunity for cross-examination.

3. Violation of Principles of Natural Justice Due to Denial of Cross-examination:
The Tribunal found that the denial of cross-examination violated the principles of natural justice. The appellant's request for cross-examination was denied, which was critical for ensuring a fair trial. The Tribunal cited the Madras High Court's decision in Veetrag Enterprises v. Commissioner of Customs, which underscored the importance of cross-examination in upholding natural justice.

4. Genuineness of Export Documents and Remittances:
The Tribunal noted that all export documents were in the name of Iranian buyers, and there was no evidence that these documents were amended to permit import at UAE. The department failed to produce any documentary evidence to show that the export documents were false or fabricated. The Tribunal also observed that the remittances were received from the Iranian consignee through proper banking channels, and there was no dispute regarding the authenticity of these remittances.

5. Jurisdiction of Customs Authorities in Cases of Alleged Foreign Trade Policy and FEMA Violations:
The Tribunal held that any violations related to foreign exchange are covered under FEMA, 1999, and not under the Customs Act. The Customs authorities did not have jurisdiction to issue a show cause notice for alleged violations of the Foreign Trade Policy and FEMA. The Tribunal relied on previous judgments, including Chinku Exports v. Commissioner of Customs, which established that enforcement authorities under FEMA and RBI are competent to initiate proceedings for such violations.

6. Liability of the Customs House Agent (CHA):
The Tribunal found that the CHA, M/s. V. Arjoon, filed shipping bills based on documents provided by the exporter and acted in good faith. Since the goods were ultimately delivered to the buyers in Iran, there was no justification for imposing a penalty on the CHA. The penalty imposed on the CHA was set aside.

Conclusion:
The Tribunal set aside the order of the Commissioner (Appeals) and allowed the appeals filed by the appellants with consequential relief as per law. The decision emphasized the importance of adhering to principles of natural justice, the admissibility of evidence, and the appropriate jurisdiction for addressing alleged violations of foreign trade and exchange regulations.

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