2022 (12) TMI 18 - AT - Customs

Levy of penalty under Section 114(3) and 114AA - confiscation of goods - improper export of goods - appellant contested the show cause notice inter-alia stating that the country of destination and port of despatch also changed as per the buyer s request - bar on export of readymade garments to UAE for availment of duty drawback or not - HELD THAT - Admittedly the goods were not available for confiscation, hence the order of confiscation is bad and accordingly order of confiscation is set aside. Further, in the facts and circumstances of the case, the order of confiscation being set aside, the penalty under Section 114(iii) is also set aside, as this penalty is not imposable in absence of confiscation. So far penalty under Section 114AA is concerned, it is found that the appellant have resorted to unauthorised modification /alteration in the shipping bill after the same was passed by the proper officer of the Customs, which amounts violation of provisions of Section 114AA - in view of the facts and circumstances, upholding the penalty under this Section the penalty is reduced to Rs.2,00,000/-. Appeal allowed in part.

Summary

Issues:
- Confirmation of penalty under Section 114(3) and 114AA of the Act
- Allegations of illegal diversion of export consignments for availing undue benefits
- Fraudulent amendments in shipping bills to change destination for incentive schemes
- Confiscation of goods, demand of ineligible amount of licenses, and drawback disallowance
- Imposition of penalties on the appellant and freight forwarding agent
- Appeal against the order of confiscation and penalties

Analysis:
The case involved the confirmation of penalties under Sections 114(3) and 114AA of the Act against the appellant, a manufacturer and exporter of readymade garments. The appellant was accused of illegally diverting export consignments to avail benefits under various incentive schemes by fraudulently amending shipping bills to change the destination country. Investigations revealed that the appellant and others altered shipping bill details after customs clearance, exporting goods to different destinations than declared. The appellant sought incentive scrips based on the declared country of origin to customs. The freight forwarding agent involved in fraudulent amendments was also investigated.

The Adjudicating Authority proposed confiscation of goods, demanded ineligible license amounts, disallowed duty drawback, and imposed significant penalties on both the appellant and the freight forwarding agent. The appellant contested the show cause notice, arguing that changes were made as per buyer's request, and they had already paid penalties for irregularly availed scrips. They maintained that the physical export of goods was not disputed, and they rightfully claimed duty drawback under the Customs Act.

The Commissioner (Appeals) upheld penalties on the freight forwarding agent but reduced penalties on the appellant, considering the repayment of incentives with interest and penalty. The appellant appealed to the Tribunal, questioning the confiscation of goods and the imposition of penalties. The Tribunal set aside the order of confiscation as the goods were not available, and penalties under Section 114(iii) were also annulled. However, the penalty under Section 114AA was upheld due to unauthorized modifications in shipping bills, albeit reduced to Rs.2,00,000.

In conclusion, the Tribunal allowed the appeal, modifying the impugned order by setting aside the confiscation and reducing the penalty under Section 114AA. The judgment emphasized the legality of penalties based on unauthorized modifications in shipping bills post-customs clearance, ultimately providing relief to the appellant while upholding penalties for violations.