2009 (6) TMI 177 - AT - Customs

Goods were over-invoiced with intent to claim undue drawback appellant collected blank invoices from certain manufacturers of garments and supplied the same to Shri Agarwal and the latter used these documents for claiming excess drawback in respect of the garments exported by them - The department, however, has not established that these very Invoices were used along with the shipping bills for claiming excess drawback by Shri Agarwal. The necessary nexus is net forthcoming. In these facts and circumstances, it cannot be held that the appellant did anything or omitted to do anything which rendered the export goods liable to confiscation under Section 113 of the Act. In other words, any penalty under Section 114 of the Act is not liable to be imposed on him.

Summary

Issues:
- Appeal against penalty imposed under Section 114 of the Customs Act
- Allegations of acting as a conduit in fraudulent transactions

Analysis:
1. Appeal Against Penalty Imposed Under Section 114 of the Customs Act:
The appellant, Shri Sandeep Naik, filed an appeal against a penalty of Rs. 2,00,000 imposed on him under Section 114 of the Customs Act by the Commissioner of Customs (EP), Mumbai. The case involved fraudulent transactions where Shri Nirmal Agarwal claimed undue drawback through over-invoicing of export goods. The Commissioner confirmed the demand against various entities involved in the fraudulent activities. The appellant was alleged to have acted as a conduit in these transactions. However, the Tribunal noted that there was no positive evidence against the appellant to support the imposition of a penalty under Section 114. The Tribunal found that the appellant did not render the export goods liable to confiscation under Section 113, and therefore, the penalty under Section 114 was not applicable to him. Consequently, the impugned order was set aside to the extent it was against the appellant, and the appeal was allowed.

2. Allegations of Acting as a Conduit in Fraudulent Transactions:
The Revenue's case was based on the assertion that Shri Sandeep Naik collected blank invoices from garment manufacturers and supplied them to Shri Agarwal for claiming excess drawback on exported garments. The invoices were purportedly from M/s. Entron Apparels, but the department failed to establish a direct link between these invoices and the excess drawback claimed by Shri Agarwal. The Tribunal observed that there was no concrete evidence connecting the appellant to the fraudulent activities. Despite the absence of a defense from the appellant, the Tribunal concluded that there was insufficient proof to hold him liable for a penalty under Section 114. The Tribunal emphasized the lack of positive evidence supporting the penalty in the impugned order. As a result, the Tribunal ruled in favor of the appellant, setting aside the penalty imposed on him.

This judgment highlights the importance of establishing a clear nexus between an individual's actions and the alleged fraudulent activities to impose penalties under relevant sections of the Customs Act. The case underscores the necessity of concrete evidence and a robust defense to substantiate allegations of involvement in fraudulent transactions, ultimately influencing the outcome of penalty appeals before the Tribunal.