2022 (7) TMI 419 - AT - Customs

Confiscation - penalty - export of Rice - consignments were originally booked for Iran, Shipping Bills/Export documents were filed for export to Iran, but investigation alleged that the consignments were delivered to UAE - violation of provisions of para 2.40 and 2.53 of the Foreign Trade Policy - rejection of cross-examination - admissibility of statements - reliable evidences or not - HELD THAT - The revenue in support of allegations rely upon the statements of Director, CHAs and the officials of Shipping Lines. However We find that these persons were not examined in the adjudication proceedings even after the request of Appellant and as such their statements are not admissible as evidence under the provisions of Section138B of Customs Act, which provides that - if an authority in any proceedings under the Act wants to rely upon the statement of any person (made during enquiry), such person is required to be examined as witness and if the adjudicating authority finds the evidence of the witness admissible , then such witness should be offered for cross-examination and only thereafter the evidence is admissible. In absence of compliance with the provision of Section138B of the Act, the statements are not admissible as evidence. Rejection of cross-examination - violation of principles of natural justice - HELD THAT - The rejection of cross-examination in the impugned matter tantamount to violation of principles of natural justice. Request for cross-examination has been denied and the witnesses have not been examined despite specific reliance by the appellant on Section138B - in the present matter all the documents in respect of disputed consignments were in the name of Iranian buyers. There is nothing on record to show that the said documents were amended at any stage so as to permit import of goods at UAE. Further Revenue nowhere produced any documentary evidence to show that the exports documents produced by the Appellant were false and fabricated. Once all the export documents were in the name of Iranian buyers there was no scope for clearance of the goods in UAE and its subsequent sale. In the present matter none of buyer at Iran have claimed that the goods have been short shipped /not received by them. None of the remittance receipts furnished to the concerned Bank, have been objected to by the concerned Indian Bank. None of the remittance receipts have been alleged to be fake. As per RBI regulations payment against exports can be received from consignee (foreign buyer) as shown in export documents and cannot be received from any other party. Therefore the contention of revenue that payment has come from third party and not from actual buyer in UAE not supported by any evidences is not sustainable. In this case the only allegation and finding against Appellant is that they had violated para 2.53 of the FTP i.e. to say that since according to the Customs the goods were actually exported to UAE, the payments should have been received in convertible foreign exchange. The whole case revolves around irregularities in respect of receipt of currency with regard to exported goods. These violations relate to post export conditions. There is no doubt that any violation relating to foreign exchange are covered under FEMA, 1999 and not under the Customs Act. Though the show cause notice invoked Section 113(d) and 113(i) of the Customs Act but these provisions were invoked by only alleging violation of para 2.53 of the FTP and section 8 of FEMA, 1999. Thus, there was no violation of Customs Act in any manner. There is no dispute about the description of the goods, its quantity and value. The export of rice was neither prohibited nor restricted. It is a well settled law that in respect of alleged violation of foreign exchange, it is the erstwhile FERA authorities or FEMA authorities who are competent to initiate the proceedings against the party - since it was only a case of alleged violation of the provisions of Foreign Trade (Development Regulation Act) and rules made there under as well as that of Foreign Exchange Management Act, the Customs authorities did not have jurisdiction to issue the show cause notice for said violation. Penalty on M/s. V. Arjoon, CHA - HELD THAT - The CHA had filed shipping bills as per the documents provided to him by exporter. Therefore the bonafide act of the Appellant cannot be doubted. The act of filing the export documents for customs clearances shows that the appellant has no mens rea and filed the documents being a bona fide facilitators - since it is already held that the goods were ultimately delivered to the buyers at Iran, there is no justification for imposing penalty upon the appellants, therefore, the penalty imposed on all the co-appellantsis set aside. The order of the Commissioner (Appeals) is set aside and all the appeals filed by the Appellants are allowed.

Summary

Issues Involved:
1. Alleged mis-declaration of export destination.
2. Denial of cross-examination of witnesses.
3. Ownership and control of goods post 'let export order'.
4. Admissibility of statements under Section 138B of the Customs Act.
5. Jurisdiction of Customs authorities in matters involving FEMA violations.
6. Role and liability of the Customs House Agent (CHA).
7. Receipt of remittance in Indian Rupees instead of freely convertible foreign currency.

Detailed Analysis:

1. Alleged Mis-declaration of Export Destination:
The case revolves around the allegation that M/s Janki Das Rice Mills exported rice to Iran, which was later found to be delivered to UAE, violating provisions of the Foreign Trade Policy. The appellant contended that the goods, though offloaded at Jabel Ali, ultimately reached Iran. They provided proof of receipt by the original consignee and remittance from the same. The tribunal found that the evidence provided by the appellant, including Dubai Customs documents and bank documents, was substantial and not countered by the department with valid evidence. The tribunal held that the mere offloading at Jabel Ali did not conclusively prove that the goods were not delivered to Iran.

2. Denial of Cross-examination of Witnesses:
The appellant's request for cross-examination of witnesses, whose statements were relied upon by the department, was denied. The tribunal emphasized the importance of cross-examination as part of the principles of natural justice and stated that the denial of this right rendered the statements inadmissible under Section 138B of the Customs Act. The tribunal cited the Madras High Court ruling in Veetrag Enterprises, reinforcing that not providing an opportunity for cross-examination violates natural justice principles.

3. Ownership and Control of Goods Post 'Let Export Order':
The tribunal noted that once the 'let export order' was issued, the ownership of the goods transferred to the foreign buyer, and the Indian exporter had no control over the goods. The tribunal referenced the CBEC circular No. 999/2015-CX and the Supreme Court ruling in Collector of Customs, Calcutta Vs. Sun Industries, which clarified that the title of goods transfers once the ship carrying the goods crosses Indian territorial waters.

4. Admissibility of Statements under Section 138B of the Customs Act:
The tribunal found that the statements relied upon by the department were inadmissible as the witnesses were not examined in the adjudication proceedings, violating Section 138B of the Customs Act. The tribunal reiterated that for statements to be admissible, the witnesses must be examined and offered for cross-examination.

5. Jurisdiction of Customs Authorities in Matters Involving FEMA Violations:
The tribunal held that the alleged violation of receiving remittance in Indian Rupees instead of freely convertible foreign currency falls under the jurisdiction of FEMA authorities and not Customs. The tribunal cited previous rulings, including Chinku Exports and Bank of Nova Scotia, to support that violations related to foreign exchange should be adjudicated by FEMA authorities.

6. Role and Liability of the Customs House Agent (CHA):
The tribunal found that the CHA, M/s. V. Arjoon, acted in good faith by filing shipping bills based on documents provided by the exporter. The tribunal noted that there was no evidence of mens rea or unlawful gain by the CHA and thus set aside the penalties imposed on the CHA.

7. Receipt of Remittance in Indian Rupees:
The tribunal observed that the entire case was based on the receipt of remittance in Indian Rupees from Iran, which the department argued should have been in freely convertible foreign currency. The tribunal held that this issue falls under the jurisdiction of FEMA authorities and not Customs. The tribunal concluded that there was no violation of the Customs Act in this regard.

Conclusion:
The tribunal set aside the order of the Commissioner (Appeals) and allowed all appeals filed by the appellants, providing consequential relief as per law. The judgment emphasized adherence to principles of natural justice, proper jurisdiction, and the importance of cross-examination in adjudication proceedings.