2025 (10) TMI 891 - AT - Customs

Confiscation and penalty set aside where 66% export shortfall resulted from internal dispatch error and clerical miscommunication

CESTAT (Bangalore) allowed the appeal and set aside the impugned order, holding that confiscation and imposition of penalty were unwarranted. The tribunal ... 100% EOU - Confiscation of goods - quantity noticed to be short against invoice - levy of penalty u/s 114(iii) of the Customs Act, 1962 - HELD THAT:- Undisputed facts of the case are that instead of export of 43 sets of items against the said two shipping bills, only 15 sets have been proposed to be cleared. Explaining the error, it was stated by the appellant through their letters dated 16.03.2013, 18.03.2013 and 22.03.2013 that it was due to mistake occurred on the part of the dispatch team which packed only 15 items instead of 43 items that were supposed to be shipped. It was contended that since the dispatch team had forwarded the wrong packing list, which were prepared in advanced supposed to be shipped, the error has occurred. Therefore, there was miscommunication between logistic department and accounts department in the preparation of the invoice. Also, it is on record that after the discrepancy was noticed by the Customs on verification, the matter was referred to the jurisdictional Central Excise authorities who in their report dated 23.07.2013 categorically stated that there was no clearance of balance items in the DTA and the shortage of 28 sets are under process in the factory. The shortage of 66% in the total export quantity mentioned in the export invoices relating to the shipping bills are nothing but error occurred on the part of the appellant’s internal dispatch team and no intention can be attributed for such mistake. Therefore, the direction for confiscation of the goods and imposition of penalty on the appellant is unwarranted; accordingly, not sustainable. The impugned order is set aside and the appeal is allowed. ISSUES PRESENTED AND CONSIDERED 1. Whether shortfall in quantity declared in export invoices (shortage of 28 sets out of 43 declared; shortage of 353 kgs.) constitutes goods 'entered for exportation' so as to attract confiscation under Section 113(h)(i) of the Customs Act, 1962. 2. Whether the shortfall amounted to actionable misdeclaration or omission attracting penalty under Section 114(iii) of the Customs Act, 1962, or was a bona fide clerical/packing error exempting the appellant from penalty. 3. Whether the evidence, including contemporaneous internal records and report of the jurisdictional Central Excise authority, supports an inference of intention to evade law or instead supports a finding of inadvertent error. ISSUE-WISE DETAILED ANALYSIS Issue 1: Applicability of confiscation under Section 113(h)(i) where declared quantity exceeds physically exported quantity Legal framework: Section 113(h)(i) authorises confiscation of goods in specified circumstances where goods have been 'entered for exportation' contrary to law. Confiscation requires that goods be treated as having been entered for exportation in a manner contemplated by the provision. Precedent Treatment: Appellant relied on prior tribunal authorities (cited) to argue that mere over-statement or clerical error does not ipso facto attract confiscation. The Tribunal considered those authorities in context of facts and records. Interpretation and reasoning: The Tribunal analysed factual matrix - shipping bills, packing lists, dispatch records and the Central Excise divisional office report - and found that the excess sets declared in invoices were not cleared to DTA and remained under process in the factory. The physical movement/entry of the excess goods for exportation was not established. The Tribunal held that where there is no physical entry of the excess goods for exportation, confiscation under Section 113(h)(i) cannot be sustained; mere mis-statement in invoice prepared in advance, caused by internal miscommunication between dispatch/logistics and accounts, is not equivalent to goods being entered for exportation in the legal sense required for confiscation. Ratio vs. Obiter: Ratio - Confiscation under Section 113(h)(i) is not attracted where declared quantity exceeds physically exported quantity but there is no evidence that the excess goods were entered for exportation; clerical/packing errors that do not result in goods being exported cannot be the basis for confiscation. Observations distinguishing prior authorities and emphasising requirement of physical entry are supportive but not necessary to case law beyond the present facts. Conclusion: Confiscation under Section 113(h)(i) was not justified on the record and the confiscation direction was set aside. Issue 2: Imposition of penalty under Section 114(iii) for alleged misdeclaration/omission Legal framework: Section 114(iii) permits imposition of penalty for wilful mis-declaration/omission or conduct attracting penalty as per statutory scheme. Determination turns on whether omission/misdeclaration was deliberate or constituted a bona fide clerical/administrative error. Precedent Treatment: Appellant relied on tribunal decisions establishing that bona fide clerical errors or inadvertent mistakes supported by contemporaneous records and follow-up explanations may disentitle revenue to penalty. The Tribunal assessed those authorities in light of the present record and the statutory standard for penalty. Interpretation and reasoning: The Tribunal evaluated the contemporaneous correspondence, packing lists, dispatch explanations and the Central Excise office's verification which corroborated that the balance items remained in factory and were not cleared to DTA. The Tribunal found that the appellant promptly furnished explanations and documentary support indicating a packing/dispatch error and internal miscommunication, not an intention to evade law. Given absence of evidence of deliberate misstatement or diversion and presence of corroborative internal records, the imposition of penalty under Section 114(iii) was unwarranted. Ratio vs. Obiter: Ratio - Penalty under Section 114(iii) cannot be imposed where the shortfall arises from an inadvertent clerical/packing error and independent records (including regulator verification) confirm absence of deliberate misdeclaration or diversion. Observations about standards of proof and weight of administrative records are instructive but ancillary. Conclusion: Penalty under Section 114(iii) was unjustified on facts showing bona fide error; penalty direction was set aside. Issue 3: Role and weight of corroborative verification by Central Excise in determining intent and relief Legal framework: Administrative and investigatory reports from related jurisdictional authorities may be relevant evidence in adjudication of confiscation/penalty, particularly to establish whether declared goods were actually cleared to DTA or remained within factory premises. Precedent Treatment: The Tribunal treated the Central Excise divisional office report as material contemporaneous evidence corroborating the appellant's explanation; prior decisions cited by parties regarding reliance on departmental verification were considered. Interpretation and reasoning: The Tribunal placed significant evidentiary weight on the Central Excise office's statement that the excess items were under process in factory and not cleared to DTA. That independent verification supported the finding that the discrepancy arose from internal packing/invoicing error and negated inference of intention to export or divert excess goods. Consequently, punitive measures predicated on intention or on goods being entered for exportation could not be sustained. Ratio vs. Obiter: Ratio - Independent corroborative verification by competent authority that excess items remained in factory and were not cleared externally materially supports a finding of inadvertence and negates inference of culpable intent for purposes of confiscation and penalty. Observations on evidentiary weight are applicable in similar fact situations. Conclusion: The Central Excise verification was determinative; it upheld the appellant's explanation and contributed to setting aside confiscation and penalty. Overall Conclusion and Disposition The Tribunal concluded that the shortages were the result of bona fide clerical/packing errors and internal miscommunication, not intentional misdeclaration or export entry of excess goods; the factual record (including Central Excise verification) did not support confiscation under Section 113(h)(i) or penalty under Section 114(iii). The impugned order imposing confiscation and penalties was set aside and the appeal allowed with consequential relief as per law.