Appellate tribunal reduces penalties for misdeclaration of export goods, quashes confiscation due to lack of evidence.

The appellate tribunal partly allowed the appeal by reducing the fine and penalty imposed on the appellants for misdeclaration of export goods, specifically quilts. The confiscation of wadding was set aside due to discrepancies in test reports and lack of evidence supporting diversion of imported silk into the local market. The judgment was pronounced by the Vice-President of the Appellate Tribunal CESTAT, CHENNAI on 9-10-09.

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Issues:
1. Misdeclaration of export goods - wadding and quilts.
2. Confiscation of goods, imposition of penalty, and export obligation under the EOU scheme.
3. Reliance on test reports and diversion of imported silk into the local market.

Analysis:
1. The case involved the misdeclaration of export goods, specifically wadding and quilts, by a 100% EOU. The appellants were found to have used locally procured cheap materials instead of the duty-free imported silk yarn as declared. The Commissioner concluded that the goods were misdeclared with the intent to import high-grade silk without duty payment and divert it in the local market. The net weight of silk goods was also misdeclared, leading to the seizure of the four export consignments.

2. The Commissioner issued a show-cause notice proposing the confiscation of wadding and quilts, imposition of penalties under the Customs Act, and declaring the goods ineligible for export obligation fulfillment under the EOU scheme. After adjudication, the Commissioner confiscated the goods with an option for redemption on payment of a fine, imposed penalties, and deemed the goods ineligible for export obligation fulfillment. The appeal challenged these decisions.

3. During the appeal, it was argued that the test reports relied upon by the adjudicating authority did not accurately represent the silk content in the export samples. The export samples were tested and found to contain a high percentage of silk, contradicting the conclusions drawn by the Commissioner based on a non-export sample. The appellants also disputed any diversion of imported silk into the local market, highlighting the lack of evidence supporting this claim.

4. The appellate tribunal set aside the confiscation of the wadding based on the discrepancies in the test reports. However, regarding the quilts, the appellants sought a reduction in the quantum of fine and penalty without challenging the confiscation. Considering the value of the quilts, the tribunal reduced the fine and penalty amounts significantly, acknowledging the appellants' plea.

5. In the final decision, the tribunal partly allowed the appeal by reducing the fine and penalty imposed on the appellants for the misdeclaration of export goods, specifically the quilts. The confiscation of the wadding was set aside, emphasizing the discrepancies in the test reports and lack of evidence supporting the diversion of imported silk. The judgment was pronounced on 9-10-09 by the Vice-President of the Appellate Tribunal CESTAT, CHENNAI.

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