Penalties for sealed-container export substitution set aside where evidence showed driver-led fraud without exporter complicity

Penalties were held unsustainable where export goods stuffed under official supervision in a sealed container were later substituted without the appellants' involvement. The record showed that the driver diverted the container, broke the seal at a godown, replaced the declared glass tumblers with red sanders, and resealed it with a look-alike seal. Statements of the supervising officers and the driver supported this sequence. The appellants' alleged failure to verify the overseas buyer or remittance did not establish participation in, or complicity with, the smuggling transaction, so penalty was set aside.

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Issues: Whether penalties imposed on the appellants were sustainable where the export goods were found to have been substituted in a sealed container without the appellants' involvement.

Analysis: The export goods were stuffed in the appellants' factory under official supervision and the container was sealed before clearance. The record showed that the driver diverted the container, broke the seal at a godown, substituted red sanders for the declared glass tumblers, and resealed it with a look-alike seal. The statements of the supervising officers and the driver supported this sequence. On these facts, there was no material to show that the appellants participated in or had any role in the fraudulent export. The findings that they failed to verify the overseas buyer or the remittance did not establish their complicity in the smuggling transaction so as to justify penalty.

Conclusion: The penalties on the appellants were not sustainable and were set aside.

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