2013 (8) TMI 725 - AT - Customs

Mis-declaration of Goods - Rejection of drawback claims Held that - The Rejection of Drawback claims was upheld due to the conduct of the assesses and in view of the investigation which was in progress - The delay was relevant only when the drawbacks were held admissible and the consequence was that the exporters were eligible for interest - The drawback claims on goods exported during the period were held up as export attempted to be made was found to be misdeclared and investigations were commenced - The Customs Act envisages payment of interest in terms of Section 75A of the Customs Act in the event of delay in disbursement of drawback claims. DEPB Scrips Cancelled on Being Time Expired - Held that - The question of denying TRA without getting DEPB scrips cancelled was not proper and legal - However, as DEPB scrips were time expired even at the time of passing of the order no order was required to be passed - the investigation revealed that the export made were not in accordance with shipping bills, it would have been appropriate that references should have been made for cancellation of that DEPB scrips The assesse-company have asked for telegraphic release advice (TRA) only in respect of two DEPB scrips though they were issued totally five DEPB scsrips - The Commissioner had denied the request for TRA - The action to deny TRA without taking action to get the DEPB scrips cancelled had no meaning - There was no order on other DEPB scrips - it was clear that the validity of DEPB scrips was only one year and the grant of TRA had no significance as of now unless the DEPB scrips were revalidated by the DGFT authorities - In the event of any request for revalidation of DEPB scrips it would be necessary for the customs authorities to take it up for with the DGFT authorities against any such renewal if so advised. Redemption Fine u/s 125 - Penalty u/s 114 Held that - Redemption fine imposed on goods which were already exported and not available for confiscation were set aside - Penalty was reduced - this was a case of export of sub-standard items and overvaluation of exports - the charge of mis-declaration and overvaluation, the Commissioner had chosen to impose excessive amounts as redemption fine, obviously in excess of market price - redemption fine imposed were to be set aside.

Summary

Issues Involved:
1. Rejection of Drawback Claims
2. Denial of DEPB Scrips
3. Confiscation and Imposition of Redemption Fine
4. Imposition of Penalties
5. Procedural and Preliminary Objections

Comprehensive Issue-wise Detailed Analysis:

1. Rejection of Drawback Claims:
The Commissioner rejected the drawback claims of M/s. Sukumar Chemicals and M/s. Agemo Leather Components, citing fraudulent export of old and used garments disguised as readymade garments. The investigation revealed that the appellants exported substandard wristwatches and PVC soles at inflated prices to claim higher and ineligible drawback amounts. The foreign buyer was closely related to the appellant-director, and the local suppliers were either non-existent or controlled by the appellant, raising doubts about the quality of the exported goods. The Tribunal upheld the rejection of drawback claims, emphasizing the appellants' failure to prove the genuineness of transactions and compliance with Section 76 of the Customs Act.

2. Denial of DEPB Scrips:
The Commissioner denied the benefit of DEPB scrips to the appellants, asserting that the DEPB claims were filed fraudulently against the export of watches and PVC shoe soles at inflated values. The Tribunal noted that while the DEPB scrips were issued by the competent authority, the action to deny TRA without canceling the DEPB scrips was inappropriate. However, since the DEPB scrips had expired by the time of the impugned order, no further action was deemed necessary.

3. Confiscation and Imposition of Redemption Fine:
The Commissioner ordered the confiscation of old and used garments fraudulently exported by the appellants and imposed hefty fines under Section 125 of the Customs Act. The Tribunal set aside the redemption fines, agreeing with the appellants that confiscation and redemption were not applicable as the goods had already been exported and were not available for confiscation.

4. Imposition of Penalties:
The Commissioner imposed substantial penalties on the appellant-companies and the appellant-director under Section 114 of the Customs Act for fraudulent exports. The Tribunal acknowledged the appellants' involvement in misdeclaration and overvaluation of exports to claim undue benefits but found the penalties excessive. The penalties were significantly reduced to Rs. 50,00,000/- each for M/s. Sukumar Chemicals, M/s. Agemo Leather Components, and the appellant-director.

5. Procedural and Preliminary Objections:
The appellants raised several procedural objections, including the relevance of the seizure on 14-9-1998, the absence of show cause notices to customs officers, and the delay in issuing the show cause notice. The Tribunal dismissed these objections, emphasizing the integral connection between the seizure and the investigation into past exports. The Tribunal also noted that departmental action had been taken against the officers involved, and the delay in issuing the show cause notice was justified by the extensive investigation required.

Conclusion:
The Tribunal upheld the rejection of drawback claims and set aside the redemption fines, while reducing the penalties imposed on the appellants. The denial of DEPB scrips was deemed procedurally improper but rendered moot by the expiration of the scrips. The Tribunal's decision balanced the need to penalize fraudulent activities with the recognition of procedural fairness and proportionality in penalties.