2008 (1) TMI 244 - AT - Customs

Tribunal Overturns Penalties for Lack of Evidence and Notice

The Tribunal found that penalties imposed on M/s. K.V.S. Exports Pvt. Ltd. and M/s. K.B.S. Manian & Brothers Pvt. Ltd. lacked a clear basis and were ... No allegation in the SCN that the appellants had been involved in any activity which rendered any goods liable for confiscation - penalty u/s 114 can be imposed on a person only on a finding of his having rendered any goods liable for confiscation or has abetted any such effort - no clear finding that the appellants had abetted an offence - prima facie appellants have made a case against the penalties imposed on them - waiver of pre-deposit and stay of recovery of the penalties granted Issues:1. Penalty imposed under Section 114 (iii) of the Customs Act on M/s. K.V.S. Exports Pvt. Ltd. and M/s. K.B.S. Manian & Brothers Pvt. Ltd.2. Allegations of abetment and involvement in illicit export activities.3. Application for waiver of pre-deposit and stay of recovery of penalties.Analysis:1. The case involved penalties imposed on M/s. K.V.S. Exports Pvt. Ltd. and M/s. K.B.S. Manian & Brothers Pvt. Ltd. under Section 114 (iii) of the Customs Act for their alleged involvement in overvaluing export goods and facilitating illicit activities. The Commissioner found that M/s. K.B.S. Manian & Brothers Pvt. Ltd. abetted the exporter M/s. Gemini Garment Exports (GGE) in committing the offence. Shri D. Vignesh, holding key positions in both companies, played a significant role in the illicit export activities. The Commissioner concluded that M/s. GGE had committed an offence under the Customs Act by overvaluing goods and was liable to repay the drawback amount received. The penalties were imposed based on these findings.2. The appellants argued that the penalties were imposed without clear findings of abetment or involvement in activities rendering goods liable for confiscation. They contended that the Commissioner relied on unproven statements and failed to establish a direct link between the appellants' actions and the alleged offences. The appellants claimed that the SCN inaccurately mentioned M/s. K.V.S. Exports Pvt. Ltd. instead of GGE, leading to confusion in the allegations. The appellants challenged the basis of the penalties and argued that the findings lacked a proper foundation, thus requesting the penalties to be vacated.3. Upon considering the arguments, the Tribunal found that the penalties imposed lacked a clear basis and were not adequately supported by evidence or proper notice consistent with principles of natural justice. The Tribunal noted that the appellants had made a prima facie case against the penalties and ordered a complete waiver of pre-deposit and stay of recovery of the penalties until the final disposal of the appeals. The Tribunal emphasized the need for a detailed examination of the evidence and arguments to determine the validity of the penalties imposed on the appellants.This comprehensive analysis highlights the key issues, arguments presented by the parties, findings of the Commissioner, and the Tribunal's decision to grant a waiver of pre-deposit and stay of recovery of penalties pending final disposal of the appeals.