2024 (2) TMI 444 - AT - Customs

Imposition of detriment / penalty u/s 114 of Customs Act, 1962 - customs broker - alleged mis-declaration of description and value in exports of M/s Pearl Enterprises intended for Malaysia - HELD THAT - Nothing has been brought on record to indicate that the appellant was concerned with any aspect of procurement prior to entering of goods for export to be cognizant of the fabric used or the purchase value. It is only owing to absence of any defence on the part of the exporter that the facts came to be unchallengeable qua the appellant also. It is to be noted that the appellant did admit to export documents having been received through an unconnected person. While that, of itself, may not lead to the conclusion of being aware of the fabric used or the value of purchase, it, nevertheless, should have been sufficient cause for caution as to satisfy himself about the veracity of the declarations being made. The role of the appellant in filing the declarations in the shipping bill, and responsibility thereof, is not in dispute. Consequently, recourse to section 114 of Customs Act, 1962 is not inappropriate. The fastening of penalty was on account of confiscation solely in the absence of defence. Moreover, there is no finding that the goods were not entitled to some drawback. There is also no finding on the mis-declaration of the earlier consignments which have been referred to as justification for magnitude of penalty. The gap between domestic value and declared value is not necessarily of such difference as to be beyond a commercial transaction, even if it to be outlier. The penalty imposed, therefore, appears to be unduly harsh and disproportionate. The ends of justice will be met by reducing the penalty to ₹10,000 - Appeal allowed in part.

Issues involved:
The judgment involves the challenge against the imposition of penalty under section 114 of the Customs Act, 1962 for alleged mis-declaration of description and value in exports, emphasizing on earlier consignments handled by the appellant. The issues revolve around the penalty amount, knowledge of the appellant regarding the fraud committed by the exporter, and the appropriateness of the penalty imposed.

Summary of Judgment:

Issue 1: Challenge against Penalty Imposition
The appellant, a customs broker, challenged a penalty of Rs. 5,00,000 imposed under section 114 of the Customs Act, 1962 for alleged mis-declaration of description and value in exports. The appellant contended that they were not involved in the procurement process and were unaware of the details. The Commissioner of Customs placed emphasis on earlier consignments to enhance the gravity of the alleged consequence.

Issue 2: Alleged Mis-Declaration
The appellant filed shipping bills for the export of ready-made garments, claiming drawback. Test reports revealed that the goods were made from cotton yarn instead of manmade fiber as declared. The declared value was rejected under Customs Valuation Rules, and the assessable value was re-determined based on market survey.

Issue 3: Knowledge of Appellant
The impugned order highlighted that the customs broker had knowledge of the fraud committed by the exporter. Despite claiming ignorance, the broker had cleared past consignments and received documents from an unauthorized person. The penalty under section 114(i) of the Customs Act, 1962 was deemed justifiable due to connivance with the exporter.

Issue 4: Penalty Imposition
The penalty was imposed for misdeclaration with intent to claim excessive drawback. The penalty amount of Rs. 5,00,000 was considered unduly harsh and disproportionate. The penalty was reduced to Rs. 10,000 to meet the ends of justice, considering the lack of defense and disproportionate nature of the penalty.

This judgment addresses the challenge against penalty imposition, the alleged mis-declaration of goods, the knowledge of the appellant regarding the fraud, and the appropriateness of the penalty amount. The penalty was reduced from Rs. 5,00,000 to Rs. 10,000 based on the disproportionate nature of the original penalty.

← Previous Next →