2024 (1) TMI 257 - AT - Customs

Levy of penalties both under Section 114 and Section 114 AA on both of the CB and the exporter together - classification of the goods declared in the Bill of Lading and in Bill of Entry - Safety Matches - initiation of recovery proceedings - Power to grant the MEIS rewards/benefit - failure to review Statutory order passed by the proper officer of Customs under Sec. 51 of the Customs Act accepting the classification - Onus of classification of the product especially when the issue involves interpretation and complex questions of law - Action against the CB - Goods attempted to be exported liable for confiscation - Initiation of Recovery Proceedings - HELD THAT - Recovery proceedings should be from the person who had obtained the MEIS scrips/instruments through fraud willful mis-representation or suppression and not against the CB - It is found from the impugned order that no recovery of duty is ordered from the appellant. The plea has no merits. Power to grant the MEIS rewards/benefit - HELD THAT - The Scrips can be used for payment of various Customs and Central Excise duties and fees as specified. In the impugned case no dispute on the classification heading of the goods under the schedule to the Customs Tariff Act 1975 has been raised. In fact, it is mentioned that as soon as the discrepancy in the classification heading was pointed out the exporter has paid the excess MEIS benefits claimed. In the era of self-assessment any wrong declaration including that of the classification of the goods which is done deliberately in the Shipping Bill / Bill of Lading for earning undue benefit on export of goods can be examined and penal action taken against all the persons concerned by Customs if so warranted. Such blame worthy acts ultimately affect the payment of Customs and Excise duties through use of freely transferable ineligible scrips, thus defrauding the exchequer. Hence while grant of rewards to the exporter is by the DGFT preventing the leakage of revenue is the concern of Customs. Therefor while the power to grant the MEIS rewards/benefit is conferred on the DGFT authorities, action for violation of specific provisions of law can be taken under both the Acts by the respective authorities. Failure to review Statutory order passed by the proper officer of Customs under Sec. 51 of the Customs Act accepting the classification under Sec. 129D of the Customs Act - HELD THAT - There is no separate assessment done by the Customs Officer, unless a need is felt to verify the self-assessed Shipping Bill based on risk-assessment parameters or otherwise. Clearence of goods for export under section 51 of the Customs Act 1962 is a procedural provision based on the satisfaction of the proper officer and no review of such subjective satisfaction is contemplated under Sec. 129D of the Customs Act 1962. Onus of classification of the product especially when the issue involves interpretation and complex questions of law - HELD THAT - The onus is on the assessee and not on the Customs Officer. In cases, where the importer or exporter is not able to determine the duty liability / make assessment for any reason, he may request the proper officer for assessment of the same under Section 18(a) of the Customs Act, 1962. The appellant has not shown that overwhelmed by the complex questions of law he had advised the exporter to request for assessment under Section 18(a) ibid. This is perhaps because as pointed out by Revenue, there can be no confusion with only one specific heading for Safety Matches in the Customs Tariff and in the MEIS schedule i.e. CTH 3605 0010. Hence the averments of the appellant is not correct. Action against the CB - HELD THAT - Action taken by a broker in terms of the license requirements are actionable under CBLR, but for actions relating to intentionally using incorrect documents etc. collusion with exporters for defrauding the exchequer etc. the cause of action is different and separate action can be taken under the Customs Acy 1962. Onus of correct classification - HELD THAT - Classification under two different Acts cannot be compared. Both the tariff schedules are not aligned and are hence not pari materia for purposes of classification of export goods - The onus of correct classification is on the appellant. If he had any doubts regarding the rates etc. he should have checked with the Department or sought assessment under Section 18(a) of the Customs Act, 1962. Goods attempted to be exported liable for confiscation - HELD THAT - Sec. 113 i provides for goods attempted to be exported liable for confiscation when the exporter mis-declares the material particulars or its value this is not the case here - Section 113 (i) of the Customs Act 1962, provides for the confiscation of goods entered for exportation which do not correspond in respect of value or in any material particular with the entry made under this. Material particulars would include the CTH of the goods as it has a bearing on the benefits accruing to the appellant. Hence a mis-declaration relating to the classification of the goods is also actionable under the said section. Onus of proving that the appellant had intentionally or knowingly made any false declaration or statement - HELD THAT - The onus of proving that the appellant had intentionally or knowingly made any false declaration is on the Department. However, when people collude to do a blame worthy act it is always hatched in secrecy, and it is impossible to adduce direct evidence of the same. The offence can be largely proved from inferences drawn from acts or illegal omission or commissions made - While it is true that Appellate bodies should not interfere with the penalty imposed by the Original Authority just because another view is possible, at the same time the legal principle is that penalty ought always to fit the misconduct. While the penalty when warranted should act as a deterrent it should not be disproportionate. It has not been brought out that the appellant illegally profited from the act. The appellant was also not seen to be a part of a conspiracy to defraud the exchequer, however he has made a mistake by a conscious disregard of the illegality and in not distancing himself from the act and reporting the matter that he knew was wrong and this blameworthy conduct warrants a penalty. However, the penalty imposed in this case is shocking and requires to be modified. Imposing penalties both under Section 114 and Section 114 AA on both of the appellant and the exporter together for the same act - HELD THAT - The penalties imposed have been done by splitting a single action under two different sections of the Customs Act, one which is in general and the other more specific to the impugned misconduct. If the appellant was being alleged to have committed two distinct offences then there should have been two distinct allegations. The fact is that goods were exported improperly only because the appellant as agent for the exporter knowingly used a declaration which was false or incorrect for export of goods. Since the role of the appellant was in knowingly using false / incorrect declaration for the improper exports of the goods, the penalty under section 114AA which is more specific to the misconduct alone would be appropriate. It is deemed appropriate that penalty of Rs 1,00,000/- under section 114AA of the Customs Act 1962 on the appellant would suffice and is so ordered - The penalty under section 114(iii) is set aside - The impugned order in as much as it relates to the appellant is modified accordingly.

Summary

Issues Involved:

1. Recovery proceedings against the Customs Broker (CB).
2. Authority to grant MEIS rewards/benefits.
3. Review of statutory order under Sec. 51 of the Customs Act.
4. Onus of classification of the product.
5. Applicability of CBLR vs. Customs Act.
6. Classification under GST and Customs Tariff.
7. Applicability of Sec. 113(i) for mis-declaration.
8. Proving intentional or knowing false declaration.
9. Double jeopardy in imposing penalties under Sections 114 and 114AA.

Summary:

Issue 1: Recovery proceedings against the Customs Broker (CB):
The Tribunal found that no recovery of duty was ordered from the appellant, thus the plea lacked merit.

Issue 2: Authority to grant MEIS rewards/benefits:
While DGFT grants MEIS rewards, Customs authorities can take penal action for irregular/illegal exports. The Customs Act allows penal action for mis-declaration affecting revenue.

Issue 3: Review of statutory order under Sec. 51 of the Customs Act:
The Tribunal noted that self-assessment by the exporter/importer is the norm, and the Customs officer's role is limited to verifying assessments. No review under Sec. 129D is necessary for procedural clearance under Sec. 51.

Issue 4: Onus of classification of the product:
The responsibility for correct classification lies with the exporter/importer under self-assessment provisions. The appellant did not seek assessment under Sec. 18(a) despite claiming complexity in classification.

Issue 5: Applicability of CBLR vs. Customs Act:
Actions under CBLR pertain to license requirements, whereas intentional misdeclaration and collusion with exporters fall under the Customs Act.

Issue 6: Classification under GST and Customs Tariff:
The Tribunal clarified that GST and Customs tariff schedules are not aligned. The onus of correct classification under Customs Tariff lies with the appellant.

Issue 7: Applicability of Sec. 113(i) for mis-declaration:
Mis-declaration of classification, impacting benefits, falls under "material particulars" and is actionable under Sec. 113(i).

Issue 8: Proving intentional or knowing false declaration:
The Tribunal found that the appellant's knowledge of the correct classification and the resultant benefits was established through the statement of the Managing Partner. However, the appellant was not seen as a willing collaborator but failed to refuse the filing or report the misclassification.

Issue 9: Double jeopardy in imposing penalties under Sections 114 and 114AA:
The Tribunal agreed that penalties under both sections for the same act led to double jeopardy. A penalty under Sec. 114AA alone was deemed appropriate.

Conclusion:
The Tribunal modified the penalty to Rs. 1,00,000/- under Sec. 114AA, setting aside the penalty under Sec. 114(iii). The appeal was disposed of on these terms.