2020 (10) TMI 499 - AT - Customs

Imposition of penalties u/s 114(iii) of the Customs Act - Wrongful availment of the duty drawback - drawback availed fraudulently by forging and manipulating documents without exporting any item - appellant submits that he was neither served show-cause notice nor intimated about the personal hearing - HELD THAT - The learned Commissioner has observed in para 6.7 that appellant had disappeared after the investigation was initiated and that the appellant has knowingly conspired with Shri G. S. Kohli in fraudulent drawback availment. It is seen that learned Commissioner has relied upon the statements of Shri G. S. Kohli and Shri Jagmohan Basant Singh Kohli. Therefore, the submissions of the appellant that his case is similar to that of other noticees against whom proceedings were dropped by the Commissioner, are factually incorrect. However, we find that his role is limited to the allegation of being a front for operating the current account of M/s. G.S.K. Exports in Bombay Cooperative Mercantile Bank; two pay-in slips bear the signature of the appellant. To this extent, the appellant has abetted the crime of M/s. G.S.K. Exports. However, it is not clear from the show-cause notice or the Order-in-Original that if there was any financial gain obtained by the appellant. In such circumstances, we find that the penalty imposed is very high. Penalty should be commensurate with the offence committed. Penalty reduced from ₹ 35,00,000/- to ₹ 5,00,000/- - appeal allowed in part.

Issues:
1. Violation of principles of natural justice in Adjudication Proceedings.
2. Alleged fraudulent export and misuse of drawback scheme.
3. Liability of the appellant to pay penalty as imposed by the Adjudicating Authority.

Issue 1: Violation of principles of natural justice in Adjudication Proceedings
The case involved an investigation by the CIU regarding the alleged wrong availment of duty drawback by the appellant, where it was found that no export had taken place, and Bills of Lading were fabricated and forged. The Show Cause Notice issued culminated in the Adjudicating Authority imposing a penalty of ?35 Lakhs under Section 114(iii) of the Customs Act on the Appellant. The appellant argued that they were not served with a copy of the Show Cause Notice or given a personal hearing, alleging a violation of principles of natural justice. The appellant contended that the impugned order should be quashed due to lack of personal hearing intimation.

Issue 2: Alleged fraudulent export and misuse of drawback scheme
The appellant's counsel highlighted that prior to the Show Cause Notice, the Special Crime Branch, CBI had investigated the case involving alleged fraudulent export and misuse of the drawback scheme by specific individuals. The charge sheet filed only named Shri G.S. Kohli, excluding the appellant. The Adjudicating Authority confirmed that the forgery and manipulation were committed by Shri G.S. Kohli alone, and the appellant's role was limited to being shown as the proprietor of G.S.K. Exports. The counsel argued that the proceedings against the appellant should have been discharged based on the findings against other individuals and the lack of evidence linking the appellant to the alleged illegal activities.

Issue 3: Liability of the appellant to pay penalty as imposed by the Adjudicating Authority
Upon reviewing the case records, the Tribunal considered whether the appellant was liable to pay the penalty imposed by the Adjudicating Authority. It was noted that the appellant's role was limited to abetting the crime of M/s. G.S.K. Exports by operating their current account in a bank. The Tribunal found that while the penalty was high at ?35 Lakhs, it was not clear if the appellant obtained any financial gain. Therefore, the Tribunal reduced the penalty to ?5,00,000, considering that the penalty should be commensurate with the offense committed.

In conclusion, the appeal was partly allowed, and the penalty imposed on the appellant was reduced to ?5,00,000.

← Previous Next →