2016 (5) TMI 890 - AT - Customs

Customs Act penalties upheld for fraudulent export activities and misdeclaration

M/s. Suvidhi Silk House Pvt. Ltd. Versus Commissioner of Customs, Mumbai

M/s. Suvidhi Silk House Pvt. Ltd. Versus Commissioner of Customs, Mumbai - TMI Issues: Alleged fraudulent export activities, imposition of penalties under Customs Act, liability of merchant exporter, misdeclaration of export goods, involvement of supporting manufacturer, penalty on company's General Manager.Analysis:1. Alleged Fraudulent Export Activities:The case involved allegations of using bogus ARE-1s for exports to claim fraudulent Central Excise Benefits. The supporting manufacturer was found to be fictitious, with no actual manufacturing activities taking place. This led to the issuance of DEPB licenses through fraudulent means, resulting in duty-free clearance of imported goods. The goods valued at a significant amount were deemed to have been confiscated under relevant sections of the Customs Act.2. Imposition of Penalties under Customs Act:The penalties were imposed under Section 114 of the Customs Act for offenses falling under Section 113(d) and 113(i). Section 113(d) pertains to goods attempted to be exported contrary to any prohibition, while Section 113(i) deals with goods entered for exportation not corresponding in value or material particulars with the entry made. The penalties were upheld based on these sections.3. Liability of Merchant Exporter:The appellant, a merchant exporter, argued that they should not be penalized for offenses committed by the manufacturer. The appellant contended that they had purchased goods for export in good faith and had exported them without any dispute. However, the tribunal found that the appellant knowingly committed offenses by misdeclaring material particulars in export documents, making them liable for penalties.4. Misdeclaration of Export Goods:The tribunal noted that the appellant declared the supporting manufacturer but procured goods that were not actually manufactured by them. This misdeclaration led to discrepancies between the export documents and the actual goods exported, violating Section 113(i) of the Customs Act. As a result, penalties were deemed appropriate for the misdeclaration.5. Involvement of Supporting Manufacturer:The supporting manufacturer's lack of actual manufacturing activities and the issuance of bogus export documents were crucial in establishing the fraudulent scheme. The tribunal found that the appellant was well aware of the manufacturer's activities and held them responsible for the misdeclaration in the export documents.6. Penalty on Company's General Manager:The General Manager of the company was also penalized for colluding with the supporting manufacturer and misdeclaring export documents. While equal penalties were imposed on both the company and the General Manager, the tribunal considered the General Manager's role as an employee and reduced his penalty to ensure justice. The tribunal dismissed one appeal and partly allowed the other with reduced penalties for the General Manager.In conclusion, the judgment upheld penalties imposed under the Customs Act on the appellant for fraudulent export activities involving misdeclaration of goods and collusion with a fictitious supporting manufacturer. The tribunal carefully considered the roles of the merchant exporter and the company's General Manager in the scheme, leading to a dismissal of one appeal and a partial allowance with reduced penalties in the other.