2022 (7) TMI 418 - AT - Customs

Tribunal overturns Customs Act penalties, affirms FEMA jurisdiction

Shiv Shakti Inter Globe Exports Pvt Ltd, Shri Aman Gupta and V Arjoon Versus C.C. -Mundra

Shiv Shakti Inter Globe Exports Pvt Ltd, Shri Aman Gupta and V Arjoon Versus C.C. -Mundra - TMI Issues Involved:1. Imposition of penalties on M/s. SSIGPL and its Director under Sections 114 and 114AA of the Customs Act, 1962.2. Liability of M/s. V. Arjoon, CHA for penalties under Sections 114 and 114AA of the Customs Act, 1962.3. Jurisdiction of Customs authorities to issue show cause notice for alleged violations of Foreign Trade Policy and FEMA.Detailed Analysis:1. Imposition of Penalties on M/s. SSIGPL and its Director:The main contention was whether M/s. SSIGPL exported rice consignments to Iran, which were diverted to Jabel Ali Port, Dubai, and sold in UAE, thereby violating the Foreign Trade Policy (FTP) and Customs Act. The Directorate of Revenue Intelligence (DRI) alleged that M/s. SSIGPL mis-declared the destination of goods and received payments in Indian Rupees instead of freely convertible currency.The Tribunal examined statements from various parties, including the Director of M/s. SSIGPL, representatives from shipping lines, and CHAs. The Tribunal noted that the statements were not tested under Section 138B of the Customs Act, which requires calling the persons whose statements are relied upon. The Tribunal found no conclusive evidence that the goods were sold in UAE instead of reaching Iran. It was established that Dubai serves as a transshipment point due to congestion at Bandar Abbas port, Iran. The Tribunal also considered the Phytosanitary Certificates and other documents, which were in the name of Iranian buyers, indicating that the goods were intended for Iran.The Tribunal referred to the proceedings initiated by FEMA authorities, which concluded that 49 out of 50 consignments reached Iran, and only one consignment had discrepancies. The Tribunal held that M/s. SSIGPL lost ownership of the goods once the 'let export order' was issued, and the responsibility shifted to the shipping lines and importers. Hence, the Tribunal set aside the penalties imposed on M/s. SSIGPL and its Director.2. Liability of M/s. V. Arjoon, CHA:The CHA, M/s. V. Arjoon, was initially exonerated by the Additional Commissioner, but the Commissioner (Appeals) imposed penalties. The Tribunal noted that the CHA acted based on documents provided by the exporter and was unaware of the diversion to Dubai. The Tribunal upheld the findings of the Additional Commissioner, stating that the CHA had no malafide intent and was not responsible for the alleged violations. Therefore, the Tribunal set aside the penalties on M/s. V. Arjoon.3. Jurisdiction of Customs Authorities:The Tribunal held that the alleged violations pertained to post-export conditions and foreign exchange regulations, which fall under the jurisdiction of FEMA authorities, not Customs authorities. The Tribunal relied on precedents, including judgments from the Supreme Court and various High Courts, which established that violations of foreign exchange regulations should be adjudicated by FEMA authorities. The Tribunal concluded that the Customs authorities did not have jurisdiction to issue the show cause notice for the alleged violations of the FTP and FEMA.Conclusion:The Tribunal allowed the appeals of M/s. SSIGPL and its Director, setting aside the penalties imposed under Sections 114 and 114AA of the Customs Act. It also restored the order of the Additional Commissioner, exonerating M/s. V. Arjoon, CHA. The Tribunal emphasized that the jurisdiction for adjudicating foreign exchange violations lies with FEMA authorities, not Customs authorities.