2020 (9) TMI 605 - AT - Customs

Imposition of penalty u/s 114(iii) and Section 114AA of the Customs Act - allegation of abetting the fraudulent export of goods - availment of undue export incentives drawback/ DEPB/ focus products scheme, etc. - export of various goods by inflating value - HELD THAT - The appellant as an employee carried out the instructions and directions of his employer. Further, the appellant had not filed any documents before the Customs Department. Thus, the allegation of attempt to export goods improperly is not established. Accordingly, we set aside the penalty imposed under Section 114(iii) of the Act. Penalty under Section 114AA of Customs Act - HELD THAT - The allegation of aiding and abetting is not proved. However, it is found that the appellant have knowingly made documents like invoices and packing list for export and had further knowledge that two sets of parallel invoices are prepared one for the purpose of buyer in the foreign country for receiving the export proceeds, and the other invoice having inflated value for receiving the duty drawback benefits. Accordingly, the appellant is liable for penalty under section 114AA - Further, as the appellant have acted only in his capacity as an employee and has not made any extra gain over salary of ₹ 15,000/- p.m., the penalty reduced to ₹ 1,12,500/- (being the amount already paid by way of pre-deposit). Appeal allowed in part.

Summary

Issues:
Penalty imposed under Section 114(iii) and Section 114AA of the Customs Act for alleged involvement in fraudulent export activities.

Analysis:
The case involved an appeal against the imposition of penalties on an appellant for his alleged role in fraudulent export activities. The appellant, an Accountant working for a company involved in overvalued exports, was accused of conniving with his employer in fraudulent practices to claim undue export benefits. The investigation revealed a scheme where goods were overvalued for export, leading to inflated invoices submitted to customs authorities. The appellant's involvement included preparing invoices, packing lists, and bank-related work under the direction of his employer.

The appellant argued that he merely followed instructions, did not participate in the export process, and did not personally gain from the fraudulent activities. He contended that the penalties were imposed mechanically without establishing his direct involvement in the fraudulent export scheme. The appellant's role was limited to administrative tasks and he had no part in negotiating or purchasing goods.

The Tribunal considered the appellant's role as an employee following instructions and not directly presenting documents to customs authorities. It concluded that the appellant did not attempt to export goods improperly, thus setting aside the penalty under Section 114(iii) of the Customs Act. However, the Tribunal found the appellant knowingly prepared documents for export, understanding the dual-invoice scheme for inflated values. Therefore, the Tribunal upheld the penalty under Section 114AA but reduced it to an amount already paid by the appellant as a pre-deposit.

In the judgment delivered on 14.09.2020, the Tribunal allowed the appeal in part, reducing the penalty imposed on the appellant. The decision highlighted the distinction between the appellant's role as an employee following instructions and his knowledge of the fraudulent export scheme. The penalties under different sections of the Customs Act were analyzed in light of the appellant's involvement, resulting in a reduction of the penalty amount under Section 114AA.