2001 (1) TMI 286 - AT - Customs

Summary

Issues:
1. Denial of duty drawback and imposition of penalty on a sole proprietorship firm and its proprietor.
2. Contention regarding market value of exported goods.
3. Applicability of Section 76(1)(b) of the Customs Act, 1962.
4. Penalty under Section 114 for improper export of goods.
5. Imposition of separate penalties on a proprietorship firm and its proprietor.

Denial of Duty Drawback and Imposition of Penalty:
The case involved M/s. Sarla Enterprises, a sole proprietorship firm, and its proprietor, who filed three drawback shipping bills for the export of readymade garments. The Directorate of Revenue Intelligence found discrepancies in the exported goods, leading to a show cause notice proposing denial of drawback claim and penalty imposition. The appellants contended that since the firm and proprietor are not separate entities, individual penalties could not be imposed. The Tribunal confirmed the denial of the drawback claim but vacated the penalty on the proprietor, maintaining a penalty of Rs. 5 lakhs on the firm.

Contention Regarding Market Value:
The appellants claimed that the goods were procured at Rs. 225 per piece, but investigations revealed they were actually purchased at Rs. 21-22 per piece from different suppliers. The market price of the exported goods was significantly lower than the claimed drawback amount, leading to the denial of the drawback claim based on Section 76(1)(b) of the Customs Act, 1962.

Applicability of Section 76(1)(b) of the Customs Act:
Section 76(1)(b) prohibits the allowance of drawback when the market price of goods is less than the amount of drawback due. In this case, the market price of the consignment was found to be only about half of the claimed drawback amount, justifying the denial of the drawback claim by the Tribunal.

Penalty Under Section 114 for Improper Export:
Section 114 provides for penalties for improper export of goods, with penalties not exceeding five times the drawback claim amount or Rs. 1000, whichever is greater. The Tribunal found that the appellants attempted to defraud the revenue by misrepresenting the value of the exported goods, justifying the penalty imposed on the firm and its proprietor.

Imposition of Separate Penalties on a Proprietorship Firm and its Proprietor:
The Tribunal acknowledged that a proprietorship firm and its proprietor are not distinct entities, leading to the decision to vacate the penalty on the proprietor while confirming the penalty on the exporting firm. The penalty was reduced to Rs. 5 lakhs on the firm, aligning with the legal understanding that separate penalties cannot be imposed on a sole proprietorship and its proprietor.

This judgment addresses the denial of duty drawback and penalty imposition on a sole proprietorship firm and its proprietor, emphasizing the importance of accurate valuation of exported goods and compliance with customs regulations. The Tribunal upheld the denial of the drawback claim due to discrepancies in the market value of the goods, citing relevant legal provisions. Additionally, the decision clarified the applicability of penalties under Section 114 for fraudulent export practices and highlighted the legal distinction between a proprietorship firm and its proprietor regarding penalty imposition.