Misdeclaration of export destination and misuse of focus market benefits results in partial penalty set-aside and maintenance of fraud penalty

Levy of penalty for misdeclaration of export destination and misuse of Focus Market benefits: demand of duty and imposition of a penalty predicated on scrip cancellation could not be sustained because the export scrips were not cancelled prior to issuance of the impugned order, resulting in set-aside of that penalty. The shipping bill and bill of lading identified Jebel Ali as port of discharge, demonstrating deliberate misstatement of destination to obtain Focus Market benefits; the penalty for fraudulent export declarations was therefore upheld. Appeal allowed in part.

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Issues: (i) Whether the penalty imposed under Section 114(iii) of the Customs Act, 1962 upon the appellant can be sustained; (ii) Whether the penalty imposed under Section 114AA of the Customs Act, 1962 upon the appellant can be sustained.

Issue (i): Whether the penalty under Section 114(iii) of the Customs Act, 1962 imposed on the appellant is maintainable.

Analysis: The record shows that a prior appellate order in connected proceedings concluded that, because the scrips were not cancelled before the Joint Commissioners order, the demand of duty and the imposition of penalty under Section 114(iii) could not be sustained. That finding formed the basis for setting aside the duty demand and the Section 114(iii) penalty in respect of the appellant. The appellate review in the present matter applied that determination to the appellants case and addressed whether the factual and procedural prerequisites for imposing the Section 114(iii) penalty were established.

Conclusion: The penalty under Section 114(iii) of the Customs Act, 1962 is set aside. (In favour of Appellant)

Issue (ii): Whether the penalty under Section 114AA of the Customs Act, 1962 imposed on the appellant is maintainable.

Analysis: The relevant statutory test for Section 114AA requires that a person knowingly or intentionally make, sign or use a declaration, statement or document which is false or incorrect in any material particular. The connected appellate finding and the record show documentary evidence (Bills of Entry and Bills of Lading indicating Jebel Ali as port of discharge) and corroborative circumstantial evidence supporting the conclusion that the appellant deliberately made false statements as to destination. The appellate review found no infirmity in upholding the Section 114AA penalty on that basis.

Conclusion: The penalty under Section 114AA of the Customs Act, 1962 is maintained. (Against the Appellant)

Final Conclusion: The appeal is allowed in part by setting aside the penalty under Section 114(iii) while upholding the penalty under Section 114AA; the overall effect is a partial success for the appellant without disturbing the Section 114AA penalty.

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