2023 (9) TMI 665 - AT - Customs

Levy of penalties u/s 114 of the Customs Act, 1962 - overvaluation of export of goods for availment of higher rate of drawback - Penalty on person who partnered with exporter - Penalty on Bank / Approved Banker for abetment - HELD THAT - The department had not issued any summon(s) to the appellant Shri Sanjay D. Bhalerao for recording of statement(s) with regard to irregular exportation of the subject goods and for ascertaining his specific role with regard to such activities. Though, the impugned order has stated that the appellant had earned 50% of profit out of the export proceeds, but did not elaborate any findings with regard to the actual role played by the appellant in irregular exportation of the goods - in absence of proper substantiation of the case, especially with regard to the appellant herein, the penal provisions contained in Section 114 ibid, cannot routinely be invoked for penalising the appellant. The Indian bank s role is confined only for scrutinization of documents to be submitted by the exporter and to forward the same to the Russian designated bank. It has also been provided that if no discrepancy report is received from the Russian Bank within seven days, then the documents sent by the Indian bank should be considered as sufficient for lodgment of claim with the RBI - when the appellant s role starts after exportation of the goods and issuance of the Let Export Order (LEO) and issue of exchange control copy of Shipping Bill by the Customs department, it would not be proper to allege that the appellant had omitted or did some act in relation to improper export of goods. In the present case, since the appellants role as a banker has started after physical exportation of the goods, more particularly after issuance of LEO and physical movement of goods from the port of export, it cannot be said that they were involved in improper exportation of goods and consequently, would be exposed to the penal liabilities provided under Section 114 ibid. There are no merits in the impugned order, in so far as it has imposed penalties under Section 114 ibid, on the appellants - appeal allowed.

Summary

Issues Involved:
The case involves the imposition of penalties under Section 114 of the Customs Act, 1962 on the appellants for alleged overvaluation of export of goods made by a specific entity for the purpose of availing a higher rate of drawback. The issues revolve around the lack of specific investigation at the appellant's end, absence of proper substantiation of the case against the appellants, compliance with circulars issued by the Reserve Bank of India (RBI), and the role of the appellants as approved bankers in the export process.

Issue 1: Lack of Specific Investigation and Proper Substantiation

The appellant Shri Sanjay D. Bhalerao argued that no specific investigation was conducted at his end regarding the alleged overvaluation of exported goods. He contended that no statement was recorded from him in connection with the matter, and the Show Cause Notice did not correctly include his name in the list of persons charged. The Tribunal observed that the department failed to issue any summons to Shri Sanjay D. Bhalerao for recording statements related to the irregular exportation of goods. The impugned order did not provide detailed findings on the actual role played by the appellant in the irregular exportation. Due to these deficiencies and the casual initiation of proceedings, the Tribunal concluded that penal provisions under Section 114 of the Customs Act could not be invoked against the appellant without proper substantiation.

Issue 2: Compliance with RBI Circulars and Role of Approved Bankers

The other appellant, M/s HDFC Bank, argued that they complied with the RBI circulars, specifically AD (GP series) Circular No. 4 dated 19.05.1999, which outlined their responsibilities. The appellant, as an approved banker, claimed to have no direct involvement in the export of goods allegedly conducted in contravention of statutory provisions. Referring to past tribunal orders, the appellant contended that their role was limited to document scrutiny and forwarding to the foreign bank. The Tribunal noted that the overseas bank found the documents submitted by M/s HDFC Bank to be in order, with no reported discrepancies within the stipulated time frame. Since the appellant's role began post-exportation, after the issuance of necessary documents, the Tribunal held that they were not involved in improper exportation of goods and thus could not be penalized under Section 114 of the Customs Act.

Decision:
After hearing both sides and examining the case records, the Tribunal found no merit in the impugned order imposing penalties under Section 114 of the Customs Act on the appellants. Consequently, the Tribunal set aside the impugned order and allowed the appeals in favor of the appellants.