2018 (6) TMI 17 - AT - Customs

Fraud - fraudulent obtaining of Advance Licenses - Penalty u/s 112(a) of the Customs Act, 1962 on Shri Mahesh Purushotam Patel who is a Chartered Accountant and the other one Shri Sudesh Dagadoba Nanaware - it was alleged that the entire modus operandi of the fraud was created by these two appellants - Held that - Shri Mahesh P. Patel has issued the solvency certificate on the basis of balance sheet which was not signed by the Chartered Accountant. Therefore, he was not supposed to issue any certificate which is not based on the audit of books account. On the basis of the certificate issued by the Chartered Accountant, Shri Mahesh P. Patel, M/s. Spectrum Fabrics obtained the advance licence fraudulently which resulted in huge revenue loss of ₹ 1.46 crores customs duty to the Government exchequer - penalty on Shri Mahesh P. Patel upheld. Penalty imposed on Shri Sudesh D. Nanaware - Held that - He is a consultant for obtaining the advance licence from DGFT. As per his advice, the entire fraud was committed - also, the appellant Shri Sudesh Nanaware, being a consultant, has admitted the pre-decided plan for committing the fraud - penalty upheld. Equal amount of penalty u/s 114A against M/s. Spectrum Fabrics - adjudicating authority had not gone into this aspect - Held that - In the show cause notice, penalty under Section 114A was proposed. However, the adjudicating authority has neither discussed the issue of penalty under Section 114A nor any order was passed in the operative portion of the order - this issue first needs to be considered by the adjudicating authority - matter on remand. Appeal dismissed - decided against appellant.

Summary

Issues Involved:
1. Imposition of penalty under Section 114A versus Section 112(a) of the Customs Act, 1962.
2. Penalty on Shri Mahesh Purushotam Patel, Chartered Accountant, under Section 112(a).
3. Penalty on Shri Sudesh Dagadoba Nanaware, consultant, under Section 112(a).

Detailed Analysis:

1. Imposition of Penalty under Section 114A versus Section 112(a) of the Customs Act, 1962:
The Revenue appealed on the grounds that the adjudicating authority did not impose a penalty under Section 114A, which is equal to the duty amount, but instead imposed a penalty of ?20,00,000/- on M/s. Spectrum Fabrics under Section 112(a). The Tribunal noted that the show cause notice proposed a penalty under Section 114A, but the adjudicating authority neither discussed nor ordered it in the operative portion. Consequently, the Tribunal remanded the issue back to the adjudicating authority for reconsideration.

2. Penalty on Shri Mahesh Purushotam Patel, Chartered Accountant, under Section 112(a):
Shri Mahesh P. Patel was penalized under Section 112(a) for issuing a solvency certificate without proper verification, which facilitated M/s. Spectrum Fabrics in fraudulently obtaining an advance license. The Tribunal upheld the penalty, emphasizing that Patel admitted in his statement under Section 108 of the Customs Act, 1962, that he issued certificates without verifying the authenticity of the documents. The Tribunal noted that Patel's retraction of his statement after four years was an afterthought and not credible. The Tribunal found that Patel's actions resulted in a revenue loss of ?1.46 crores to the government and thus justified the penalty of ?5 lakhs.

3. Penalty on Shri Sudesh Dagadoba Nanaware, Consultant, under Section 112(a):
Shri Sudesh D. Nanaware was penalized under Section 112(a) for his role as a consultant in facilitating the fraud by obtaining advance licenses for M/s. Spectrum Fabrics. The Tribunal upheld the penalty, noting that Nanaware admitted in his statement under Section 108 of the Customs Act, 1962, that he was part of a pre-decided plan to commit fraud by obtaining advance licenses and selling duty-free imports in the open market. The Tribunal found that Nanaware's role was crucial in the execution of the fraud, and his subsequent attempts to downplay his involvement were not credible.

Conclusion:
The Tribunal upheld the penalties imposed on Shri Mahesh P. Patel and Shri Sudesh D. Nanaware under Section 112(a) of the Customs Act, 1962, and remanded the issue of the penalty under Section 114A back to the adjudicating authority for reconsideration. The appeals of Shri Mahesh P. Patel and Shri Sudesh D. Nanaware were dismissed, while the Revenue's appeal was allowed by way of remand.