2024 (3) TMI 293 - AT - Customs

Levy of penalties - Misuse of such MEIS Scrips/licenses by mis-classification of their export goods - Exports of quilts containing cotton/polyester - exemption Notification No. 24/2015 Customs dated 08/04/2015 - contravention of Foreign Trade Policy - issued Show Cause Notice - Seeking waiver of penalties on the ground of voluntarily deposited along with due interest - It is claimed that The Appellant has paid the differential amount immediately on raising objection by DRI on its own before issuance of SCN along with interest as it have absolute respect for the process of law and to avoid litigation. - Levy of penalties on Partners of the firm and its employees HELD THAT - We find that the benefit having been reversed indicates wrongful use of MEIS Scheme and the conduct of differential treatment to same exports at different ports justifies the penalty as has been imposed by the department through well reasoned order of the Commissioner of Customs, Kandla, which is impugned before us. Proceedings by DGFT authorities under a different statute, cannot absolve appellant of penal consequences to be visited for their acts under Customs Act, 1962. We therefore, find the order is maintainable as far as the penalty of M/s. FASHION ACCESSORIES is concerned. Levy of penalty on Employees - HELD THAT - The role of Jile Singh Manager export and Pardeep Arora Manager Shipping has been found to be not showing any knowledge and connivance, so as to warrant penalty u/s 114 (iii), 112 or 114AA of the Customs Act, 1962. It has been stated that their role in improper importation and exportation was not found. For the same reasons penalty u/s 117 cannot be imposed on them for stated passive role in the case as Section 117 being residuary penal provision requires existence of provision as well as no specific penalty for the same. We find that remaining passive has not been shown to be violation of any specific provision. Even otherwise it is not alleged that they drew any benefit for themselves by obeying directions of theirs master. Thus, the penalties on these appellants are dispensed with. Levy of penalty on Partners of the Firm - HELD THAT - Since penalty has been imposed on firm, we do not consider it justified to impose separate penalty on the partner, same, therefore against the partner Shri. Anoop Thatia is dispensed with in the facts and circumstances of this matter. Ordered accordingly. Penalty on the firm is maintained. Appeals of individuals are allowed. Appeals are partly allowed.

Summary

Issues Involved:
1. Misclassification of exported goods.
2. Fraudulent availing of MEIS benefits.
3. Penal actions against the firm and its associates.
4. Recovery of customs duty and penalties.

Summary:

Misclassification of Exported Goods:
The exporter, M/s. FA, misclassified quilts fitted with cotton/polyester under two different HS codes, "94049019" and "94049099", to fraudulently avail higher MEIS benefits. This misclassification was deliberate, as evidenced by statements from the firm's managers and partner, who admitted to the incorrect classification to claim higher incentives.

Fraudulent Availing of MEIS Benefits:
The firm knowingly availed higher MEIS benefits by misclassifying the quilts. The declaration made in the MEIS application was false, amounting to willful misstatement. The firm also transferred/sold the MEIS credit scrips to other importers, who utilized them to import goods, resulting in a duty credit of Rs. 3,77,53,455 being fraudulently obtained.

Penal Actions Against the Firm and Its Associates:
The Commissioner of Customs, Kandla, imposed penalties on M/s. FA and its associates. M/s. FA was penalized under various sections of the Customs Act, 1962, including Sections 114(iii), 114AA, and 114AB. The firm's partner, Shri Anoop Thatai, and managers, Shri Jile Singh and Shri Pradeep Arora, were also subjected to penalties, although the penalties on the managers were later dispensed with due to lack of evidence of their connivance.

Recovery of Customs Duty and Penalties:
The firm was ordered to recover customs duty equal to the ineligible MEIS benefits availed and utilized, amounting to Rs. 7,66,729, along with applicable interest. The goods imported by utilizing the fraudulently obtained scrips were held liable for confiscation, and penalties were imposed accordingly. The firm had already paid Rs. 5,04,96,534 (including interest) during the investigation, which was considered while imposing the penalties.

Appeals and Findings:
The appeals filed by M/s. FA and its associates were partly allowed. The penalties on the firm were maintained, but the penalties on the partner, Shri Anoop Thatai, were dispensed with. The penalties on the managers were also dispensed with due to lack of evidence of their active involvement in the fraudulent activities. The mitigating circumstances, such as the firm's payment of duty and interest and its credentials as a three-star export house, were considered in the final judgment.