2014 (6) TMI 848 - AT - Customs

Duty evasion penalty waived for inflated freight rates in Iron Ore export case.

The case involved an application for waiver of pre-deposit of duty and penalty by M/s. Twenty First Century Iron & Steel Ltd. for exporting Iron Ore ... Waiver of pre deposit - export of Iron Ore Fine and Lumps - Valuation - Addition of freight to the assessable value to export of goods - Held that:- As per the revenue the freight has been inflated to suppress the value of exported goods. This is evident from the evidence on record i.e. the chartered party agreement the actual freight rate is at the US$ 27 PMT. The adjudicating authority in para 18.3 also gave a finding that for the purpose of receiving proceeds for goods the applicant made parallel agreement showing lower freight rate. The applicants received the remittance as per the actual agreement according to which the freight is actually US$ 27 PMT. In these circumstances, prima facie the applicant had not made a case for waiver of pre-deposit of duty. The applicants M/s. Twenty First Century Iron & Steel Ltd. are directed to deposit an amount of Rs.11,18,700/- within a period of eight weeks. On deposit of the above mentioned amount, the pre-deposit of the remaining amount of penalties are waived - stay granted partly. Issues:1. Waiver of pre-deposit of duty and penalty under Section 114(AA) of the Customs Act, 1962 for export of Iron Ore Fine and Lumps.2. Contention regarding adding freight to the assessable value of exported goods.3. Allegation of inflating freight to suppress the value of exported goods.Analysis:The case involved an application for the waiver of pre-deposit of duty and penalty by M/s. Twenty First Century Iron & Steel Ltd. for export of Iron Ore Fine and Lumps. The applicant declared a higher freight rate of US$ 45 WMT, while the actual freight rate was US$ 27 PMT. The revenue alleged that the higher freight rate was used to suppress the value of goods for Customs duty purposes. The applicant argued that freight should not be added to the assessable value of exported goods, even if a higher freight was charged. However, the revenue presented evidence, including the chartered party agreement, showing the actual freight rate of US$ 27 PMT. The adjudicating authority found that the freight was inflated to suppress the value of exported goods, as evidenced by the parallel agreement showing a lower freight rate for receiving proceeds. Consequently, the applicant was directed to deposit Rs.11,18,700 within eight weeks, and the remaining penalties were waived upon this deposit.Regarding the penalty imposed on Shri Gaurav Goel, the Chairman and Managing Director of the firm, it was found that he was overseeing the affairs of the company and was involved in inflating the freight to evade duty payment. Shri Gaurav Goel was directed to deposit Rs.50,000 within eight weeks, and the remaining dues were waived upon this deposit. The recovery of the dues was stayed during the pendency of the appeals. The compliance was to be reported by a specified date. The judgment highlighted the importance of accurate declaration of freight rates and the consequences of inflating freight to manipulate the value of exported goods for duty evasion purposes.