2022 (7) TMI 418 - AT - Customs

Levy of penalty on Exporter and CHA - consignments of rice were exported to Iran but delivered/diverted/discharged at Jabel Ali Port Dubai and sold in UAE whereas the payments were received from Iranian buyers in Indian currency - whether 50 consignments of rice exported by M/s. SSIGPL were sold in UAE or ultimately reached Iran after these consignments were off loaded at Jabel Ali Port Dubai? - HELD THAT - M/s. SSIGPL lost the ownership of the goods as soon as let export order was issued by the Customs authorities. After the said let export order it was the responsibility of the Shipping Lines to ship the goods to the foreign buyer and the exporter having no control over the goods. We have already held that M/s. SSIGPL had given instructions to change the port only in five cases out of 50 that too after the cargo had left the port. In remaining 45 cases there is no material on record that M/s. SSIGPL had given any instruction to change the port. Hence M/s. SSIGPL cannot be held responsible if the importer situated at Iran had given instruction to change the port from Bandar Abbas port to Jabel Ali port as after the let export order was issued by the Customs authorities it was the importer at Iran who became the owner of the goods. The whole case revolves around irregularities in respect of receipt of currency with regard to exported goods. We find 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 - FEMA authorities had initiated inquiries against M/s. SSIGPL and its director and they have penalized them with respect to only one consignment which was mentioned at S.No. 25 of the table which was presented before the FEMA authorities. But the crucial aspect of the matter is that in the adjudication proceedings by FEMA authority it has been held that all the 50 consignments ultimately reached Iran through Jabel Ali port Dubai. Levy of penalty on M/s. SSIGPL again on the ground that the goods were actually sold in UAE and export proceeds were received from a third party in Iran - HELD THAT - The overwhelming evidence clearly establishes that Jabel Ali port was only used as transit port wherefrom the goods were further exported to Iran. Hence there is no justification for sustaining penalty upon M/s. SSIGPL under Section 114 and 114AA of the Customs Act. We therefore set aside the penalty upon M/s. SSIGPL. Levy of penalty on Shri Aman Gupta Director of M/s. SSIGPL - HELD THAT - Since there is no violation committed by M/s. SSIGPL there is alsono warrant for sustaining penalty on Shri Aman Gupta Director of M/s. SSIGPL which is also set aside. Levy of penalty on M/s. V. Arjoon CHA Shri Tushar H. Anam partner of M/s. V. Arjoon - HELD THAT - As it is already held that the goods were ultimately delivered to the buyers at Iran there is no justification for imposing penalty upon the CHA. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Imposition of penalties on M/s. SSIGPL and its Director under Sections 114 and 114AA of the Customs Act, 1962.
2. Liability of M/s. V. Arjoon, CHA for penalties under Sections 114 and 114AA of the Customs Act, 1962.
3. Jurisdiction of Customs authorities to issue show cause notice for alleged violations of Foreign Trade Policy and FEMA.

Detailed Analysis:

1. Imposition of Penalties on M/s. SSIGPL and its Director:
The main contention was whether M/s. SSIGPL exported rice consignments to Iran, which were diverted to Jabel Ali Port, Dubai, and sold in UAE, thereby violating the Foreign Trade Policy (FTP) and Customs Act. The Directorate of Revenue Intelligence (DRI) alleged that M/s. SSIGPL mis-declared the destination of goods and received payments in Indian Rupees instead of freely convertible currency.

The Tribunal examined statements from various parties, including the Director of M/s. SSIGPL, representatives from shipping lines, and CHAs. The Tribunal noted that the statements were not tested under Section 138B of the Customs Act, which requires calling the persons whose statements are relied upon. The Tribunal found no conclusive evidence that the goods were sold in UAE instead of reaching Iran. It was established that Dubai serves as a transshipment point due to congestion at Bandar Abbas port, Iran. The Tribunal also considered the Phytosanitary Certificates and other documents, which were in the name of Iranian buyers, indicating that the goods were intended for Iran.

The Tribunal referred to the proceedings initiated by FEMA authorities, which concluded that 49 out of 50 consignments reached Iran, and only one consignment had discrepancies. The Tribunal held that M/s. SSIGPL lost ownership of the goods once the 'let export order' was issued, and the responsibility shifted to the shipping lines and importers. Hence, the Tribunal set aside the penalties imposed on M/s. SSIGPL and its Director.

2. Liability of M/s. V. Arjoon, CHA:
The CHA, M/s. V. Arjoon, was initially exonerated by the Additional Commissioner, but the Commissioner (Appeals) imposed penalties. The Tribunal noted that the CHA acted based on documents provided by the exporter and was unaware of the diversion to Dubai. The Tribunal upheld the findings of the Additional Commissioner, stating that the CHA had no malafide intent and was not responsible for the alleged violations. Therefore, the Tribunal set aside the penalties on M/s. V. Arjoon.

3. Jurisdiction of Customs Authorities:
The Tribunal held that the alleged violations pertained to post-export conditions and foreign exchange regulations, which fall under the jurisdiction of FEMA authorities, not Customs authorities. The Tribunal relied on precedents, including judgments from the Supreme Court and various High Courts, which established that violations of foreign exchange regulations should be adjudicated by FEMA authorities. The Tribunal concluded that the Customs authorities did not have jurisdiction to issue the show cause notice for the alleged violations of the FTP and FEMA.

Conclusion:
The Tribunal allowed the appeals of M/s. SSIGPL and its Director, setting aside the penalties imposed under Sections 114 and 114AA of the Customs Act. It also restored the order of the Additional Commissioner, exonerating M/s. V. Arjoon, CHA. The Tribunal emphasized that the jurisdiction for adjudicating foreign exchange violations lies with FEMA authorities, not Customs authorities.