2012 (6) TMI 225 - HC - Customs

Levy of penalty u/s 114 of the Customs Act is in respect of export cargo for getting undue benefit under DEPB scheme - goods exported was garments - knitted T-shirts- declaring an average value at Rs.175 per piece. However, on enquiry customs found that the average market value per piece will not be more than Rs.40 Held that - version of the appellant in respect of the yarn was bogus. violation of S.113 leading to consequent confiscation u/s 113, penalty is levied under S. 114 of the Customs Act. However, counsel for the appellant submitted that penalty is based on estimation of value based on market enquiry. - Penalty reduced from Rs.3 lakhs to Rs.2 lakhs.

Summary

Issues: Allegation of undervaluation of export cargo under DEPB scheme leading to penalty under Customs Act.

The judgment by the Kerala High Court, delivered by Mr. Justice C.N.Ramachandran Nair and Mr. Justice Babu Mathew P. Joseph, addressed the issue of undervaluation of export cargo under the DEPB scheme, resulting in the imposition of a penalty under Section 114 of the Customs Act. The appellant had declared an average value of Rs.175 per piece for knitted T-shirts exported, but customs authorities found the market value to be significantly lower at Rs.40 per piece. The Department alleged that the appellant had sought undue benefits under the scheme, leading to a case being booked against them. Despite the appellant's resistance and production of details, a second inquiry by the intelligence wing confirmed the Department's findings, particularly regarding the yarn used, which was deemed to be falsely represented by the appellant. The Tribunal, in line with principles established by the Supreme Court in the case of Om Prakash Bhatia v. CCE, Delhi, upheld the adjudication order based on factual findings. Consequently, a penalty was imposed under Section 114 due to the violation of Section 113, resulting in confiscation. The appellant argued that the penalty was based on market value estimation and requested a reduction, which the Court considered valid. Therefore, the Court modified the penalty amount, reducing it from Rs.3 lakhs to Rs.2 lakhs, allowing the appeal in part.

This judgment highlights the significance of accurate valuation in customs matters, emphasizing the consequences of undervaluation or misrepresentation in export transactions. The Court's reliance on factual findings and adherence to established legal principles, as demonstrated through references to relevant case law, underscores the importance of consistency and precedent in adjudicating such cases. The Court's willingness to consider the appellant's argument for a reduction in the penalty amount based on market value estimation reflects a balanced approach to addressing penalties under the Customs Act, ensuring fairness while upholding legal standards. The reduction in the penalty amount serves as a corrective measure, balancing the enforcement of penalties with considerations of proportionality and mitigating factors presented by the appellant. Overall, the judgment provides a comprehensive analysis of the issues involved, offering a nuanced perspective on the application of customs laws and penalties in cases of undervaluation and scheme misuse.