2022 (12) TMI 18 - AT - Customs

Tribunal rules on penalties in customs case, reduces manufacturer and exporter fines, upholds freight forwarder penalties

The Tribunal allowed the appeal, setting aside the confiscation of goods and reducing the penalty under Section 114AA to Rs.2,00,000. The penalties on the ... Confiscation of exported goods - requirement of availability of goods for confiscation - penalty under Section 114(iii) - penalty under Section 114AA - unauthorised amendment of shipping billConfiscation of exported goods - requirement of availability of goods for confiscation - penalty under Section 114(iii) - Validity of confiscation order under Section 113 and consequential imposition of penalty under Section 114(iii) - HELD THAT: - The Tribunal found that the goods in question had admittedly been exported and therefore were not available for confiscation at the time of adjudication. In those circumstances the order of confiscation under Section 113 could not be sustained. Because the penalty under Section 114(iii) is predicated on confiscation, the Tribunal held that that penalty could not be imposed in the absence of a valid confiscation order and accordingly set aside the penalty under Section 114(iii). [Paras 17]Order of confiscation set aside; penalty under Section 114(iii) set aside.Penalty under Section 114AA - unauthorised amendment of shipping bill - Imposability and quantum of penalty under Section 114AA for unauthorised modification of shipping bills - HELD THAT: - The Tribunal accepted that there were unauthorised manual amendments in the shipping bills after they had been passed by the proper officer, amounting to a violation of the provisions covered by Section 114AA. On that basis the Tribunal sustained liability under Section 114AA but applied judicial mitigation of quantum in view of the factual matrix and earlier repayments by the appellant. The penalty under Section 114AA was therefore reduced to Rs.2,00,000. [Paras 17]Penalty under Section 114AA upheld but reduced to Rs.2,00,000.Final Conclusion: The appeal is allowed: the confiscation order is set aside and the penalty under Section 114(iii) is quashed; penalty under Section 114AA is sustained but reduced to Rs.2,00,000; the impugned order is modified accordingly. Issues:- Confirmation of penalty under Section 114(3) and 114AA of the Act- Allegations of illegal diversion of export consignments for availing undue benefits- Fraudulent amendments in shipping bills to change destination for incentive schemes- Confiscation of goods, demand of ineligible amount of licenses, and drawback disallowance- Imposition of penalties on the appellant and freight forwarding agent- Appeal against the order of confiscation and penaltiesAnalysis:The case involved the confirmation of penalties under Sections 114(3) and 114AA of the Act against the appellant, a manufacturer and exporter of readymade garments. The appellant was accused of illegally diverting export consignments to avail benefits under various incentive schemes by fraudulently amending shipping bills to change the destination country. Investigations revealed that the appellant and others altered shipping bill details after customs clearance, exporting goods to different destinations than declared. The appellant sought incentive scrips based on the declared country of origin to customs. The freight forwarding agent involved in fraudulent amendments was also investigated.The Adjudicating Authority proposed confiscation of goods, demanded ineligible license amounts, disallowed duty drawback, and imposed significant penalties on both the appellant and the freight forwarding agent. The appellant contested the show cause notice, arguing that changes were made as per buyer's request, and they had already paid penalties for irregularly availed scrips. They maintained that the physical export of goods was not disputed, and they rightfully claimed duty drawback under the Customs Act.The Commissioner (Appeals) upheld penalties on the freight forwarding agent but reduced penalties on the appellant, considering the repayment of incentives with interest and penalty. The appellant appealed to the Tribunal, questioning the confiscation of goods and the imposition of penalties. The Tribunal set aside the order of confiscation as the goods were not available, and penalties under Section 114(iii) were also annulled. However, the penalty under Section 114AA was upheld due to unauthorized modifications in shipping bills, albeit reduced to Rs.2,00,000.In conclusion, the Tribunal allowed the appeal, modifying the impugned order by setting aside the confiscation and reducing the penalty under Section 114AA. The judgment emphasized the legality of penalties based on unauthorized modifications in shipping bills post-customs clearance, ultimately providing relief to the appellant while upholding penalties for violations.