2025 (8) TMI 1410 - AT - Customs

Seized shark fins not confiscable for attempted export absent evidence; value re-determination rejected; penalty under Section 114(i) set aside

CESTAT MUMBAI - AT held the seized shark fins were not liable for confiscation for attempted export due to absence of documentary evidence of export ... Absolute confiscation - re-determination of value of the impugned goods - imposition of penalty on the appellant through the proprietor - attempt to export the goods - HELD THAT:- As per the provisions of Section 113 of the Act of 1962, goods attempted to be improperly exported, are liable for confiscation. Clause (d) of Section 113 ibid provides for confiscation of any goods attempted to be exported or brought within the limits of any customs area for the purpose of being exported, contrary to any prohibition imposed by or under the Act of 1962 or any other law for the time being in force. On the issue of ‘attempted to export’, it is an undisputed fact that shark fins were stored by the appellant in its cold storage facility at Mumbai and at the open storage place at Verawal, the fact of which has also been acknowledged at paragraph 5.8 in the impugned order. The shark fins were kept in HDPE bags and in some cases, Corrugated boxes placed in HDPE bags. It is also undisputed that no documentary evidences viz., shipping bill, proforma invoice, communications in the form of emails, letters, etc., were relied upon by the department either in the show cause notice or in the impugned order. On the question of valuation of the seized goods, the original authority has re-determined the value, based on a statement rendered from Shri M.Sharafat Ali. The statement reads “on being asked it is stated that the price in Hongkong for the shark fins is 1200 to 1500 USD per kgs for big fins, USD 650 for medium fins and USD 500 for smaller fins”. This statement stood retracted, wherein Shri Sharafat Ali had stated that he was forced to sign a computerized statement and it was recorded by Officers of DRI, using threat and coercion. We find from the case records that the retraction was submitted before the Additional Chief Metropolitan Magistrate Esplanade, Mumbai. It is observed that in the statement recorded by the department, there is no mention of the period, the quantity, quality etc., of the shark fins which would fetch the price mentioned by Shri Sharafat Ali - In absence of any such relevant details, no reliance can be placed on the said statement, especially when it stood retracted. No further follow up statements were taken to substantiate the said value. No corroborative statements from the other co-noticees involved in the show cause proceedings were also taken in respect of the transaction value of the consignment. In absence of any corroborative evidences, redetermination of value, that too at a much higher price in the impugned order, in our considered view, is contrary to Customs Valuation (Determination Of Value Of Export Goods) Rules 2007 read with Section 14 of the Customs Act, 1962. On the issue of invocation of the provisions of Section 114(i) of the Act of 1962 for imposition of penalty on the proprietor of the appellant Shri Sarafat Ali, the said statutory provisions are applicable only in the eventuality, where the goods are liable for confiscation under Section 113 ibid. As discussed in the previous paragraphs, it is concluded that the shark fins were not liable for confiscation inasmuch as there was no attempt to export of the same by the appellant. Thus, the impugned order imposing penalty on the proprietor cannot be sustained. There are no merits in the impugned order, insofar as it has confiscated the shark fins, re-determined the value at higher side and imposed penalty on the proprietor of the appellant Shri Sarafat Ali. Therefore, the impugned order is set aside and the appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether the impugned order correctly held the seized shark fins to be absolutely confiscable under Section 113(d) of the Customs Act, 1962 by treating the storage as an 'attempt to export'. 2. Whether the original authority properly re-determined the value of the seized shark fins (at USD 1,000-1,500/kg) consistent with the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 and Section 14 of the Customs Act, 1962. 3. Whether imposition of penalty under Section 114(i) of the Customs Act, 1962 on the proprietor is sustainable where confiscation under Section 113 was ordered. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Confiscation under Section 113(d): Whether storage amounted to 'attempt to export' Legal framework: Section 113(d) provides for confiscation of goods 'attempted to be exported ... contrary to any prohibition' under the Act; the concept of 'attempt' requires intention plus an actus reus proximate to commission (intention, preparation and a preliminary act beyond mere preparation). Precedent treatment: The Tribunal reviewed authoritative exposition of 'attempt' from the Supreme Court (Malkiat Singh) and Tribunal jurisprudence (V. Thiruvalagan), stressing the distinction between mere preparation and acts constituting an attempt. Interpretation and reasoning: The Tribunal examined facts: goods stored at appellant's premises (Mumbai and Veraval), absence of documentary evidence (shipping bills, proforma invoices, communications), lack of connection to a customs area or port, and no evidence of steps constituting a proximate act toward export. Reliance placed in the impugned order on cases where seizure had factual nexus to movement toward a port or customs border - facts not present here. Applying the test from Malkiat Singh and the four-part formulation of attempt, the Tribunal found that mere storage and past exports do not demonstrate an overt act dangerously proximate to export; evidence fell into the category of preparation rather than attempt. Ratio vs. Obiter: Ratio - An act of storing goods at non-customs premises without documentary or overt acts linking them to the customs area does not, per se, constitute an 'attempt to export' for purposes of Section 113(d). Obiter - Observations distinguishing factual matrices of cited cases. Conclusion: Confiscation under Section 113(d) could not be sustained because the Revenue failed to prove acts beyond mere preparation or sufficient proximate acts evidencing intention to export. Issue 2 - Redetermination of value: Whether reliance on a retracted statement and absence of corroboration warranted valuation at USD 1,000-1,500 per kg Legal framework: Valuation of export goods must follow the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 read with Section 14, requiring proper evidentiary basis and adherence to statutory valuation principles. Precedent treatment: Tribunal and Supreme Court authority summarized in submissions emphasise that valuation cannot rest solely on uncorroborated or retracted statements and that proper documentary proof and follow-up are needed to establish transaction value. Interpretation and reasoning: The adjudicating authority re-determined value based on a statement attributing high Hong Kong prices, but that statement was retracted by the declarant alleging coercion. The Tribunal noted absence of details in the statement (period, quantity, quality), absence of follow-up enquiries, absence of corroborative statements from co-noticees, and no documentary evidence (shipping bills or declared export values). Given these gaps and the retraction, reliance on that statement contravened the statutory valuation regime. Ratio vs. Obiter: Ratio - Valuation cannot be redetermined at a substantially higher rate based solely on a retracted, uncorroborated statement; statutory valuation principles require corroborative evidence and proper inquiry. Obiter - Remarks on the need for follow-up questioning and specific transactional details when using declarant's price statements. Conclusion: The re-determination of value at the higher USD rates was unsustainable; the impugned valuation is contrary to the valuation rules and Section 14. Issue 3 - Imposition of penalty under Section 114(i) where confiscation was ordered Legal framework: Section 114(i) penalty provisions operate in the context of goods liable to confiscation under Section 113; imposition of penalty is contingent upon goods being liable for confiscation. Precedent treatment: The Tribunal applied statutory linkage between confiscation and penalty and earlier authorities addressing that penalty cannot be sustained where foundational confiscation is unsupported. Interpretation and reasoning: Having held that confiscation under Section 113(d) was not made out, the Tribunal reasoned that the predicate for invoking Section 114(i) did not exist; hence the penalty imposed on the proprietor could not stand. Ratio vs. Obiter: Ratio - Penalty under Section 114(i) cannot be sustained where the statutory basis for confiscation under Section 113 is absent. Obiter - None material beyond application of statutory nexus. Conclusion: The penalty imposed under Section 114(i) on the proprietor is unsustainable and must be set aside as it depends on a valid confiscation order which was not established. Cross-references and Overall Conclusion Cross-reference: Issues 1 and 2 are interrelated - deficient proof of attempt to export (Issue 1) undermines both confiscation and the evidentiary basis for valuation (Issue 2); Issue 3 (penalty) is dependent on the outcome of Issue 1. Overall conclusion: The Tribunal set aside the impugned order insofar as it ordered confiscation, re-determined value at the higher rate, and imposed penalty on the proprietor; the appeal was allowed in favour of the appellant on these points. The Tribunal's determinations are based on statutory construction of 'attempt', applicable valuation rules, and the dependency of penalty on valid confiscation.