Customs, Excise and Gold Tribunal - Delhi
Satyender Singh vs Commissioner Of Customs, Icd on 14 November, 2005
ORDER
R.K. Abichandani, J. (President)
1. The appellant has filed this application for interim stay of the impugned order made by the Commissioner holding that the ready made garments exported vide 21 shipping bills as detailed in paragraph 2 of the show cause notice which declared the FOB value of Rs. 2,14,84,638/- were liable for confiscation under Section 113 (i) of the Customs Act and imposing fine of Rs. 10 lacs on the exporters in lieu of confiscation and further declaring that the drawback of Rs. 26,23,075/- was not admissible under Section 76(l)(b) of the Customs Act and directing recovery thereof from the exporter under Rule 16 and 16A of the Customs and Central Excise Duties Drawback Rules, 1995 with interest under Section 75A(2) of the Act and further imposing a penalty of Rs. 5 lacs on M/s. Varuna Overseas under Section 114 of the Act and a penalty of Rs. 2.5 lacs on Satyender Singh, Proprietor of that concern.
2. Satyender Singh was the proprietor of M/s. Varuna Overseas. The shipping bills of Varuna Overseas were collected by the customs authorities which revealed that the exported goods declared as ready made garments of ladies tops were exported under 21 shipping bills under a claim claimed for duty drawback. On the basis of the material on record from the statements of the appellant and the other persons, it was revealed during the investigation that the appellant, in collusion with Sanjay Kumar, Vinay Kumar Chauhan, Manish Yadav and Kailash Joshi, had exported cheap quality export surplus goods which were actually procured at a market price of Rs.14/- per piece, but the same were grossly over-invoiced at US $7.25 per piece (equivalent to Rs. 347.27 per piece), with a view to fraudulently claim undue benefit of duty drawback. The investigations showed that while the market price of the garments being exported was Rs. 14/- per piece only, an amount of Rs. 42.05 was being availed as drawback on each such garment. The investigations also revealed that the export proceeds in respect of garments exported by M/s. Varuna Overseas were not realised. Since the benefit of drawback duty was taken on the basis of mis-declaration, and export proceeds were not realised, show cause notice was issued in the context of provisions of Section 50(1), 50(2), 75A(2), 76(l)(b), 113(d), 113(i), 114 of the Customs Act and Rule 9(1) of the Foreign Exchange Management Act 1999 and Foreign Exchange (Export of Goods and Services) Regulations, 2000, Rules 16 and 16A of the Customs and Central Excise Duties Drawback Rules, 1995, Rule 11 and 14 of Foreign Trade (Regulation) Rules, 1993 and the appellant was called upon to show cause why the goods exported should not be liable to confiscation and the duty drawback availed should not be denied and as to why the amount should not be recovered under Rule 16 and 16A of the Drawback Rules with interest under Section 75A(2) of the said Act.
3. The Commissioner on the basis of the material on record came to a finding that the appellant, in collusion with others, had exported cheap quality export surplus garments which were procured at a local market price of Rs. 14/-per piece and that these were grossly over invoiced at Rs. 347.27 per piece with a view to claim duty drawback. It was held that the value of the goods was not correctly mentioned in the shipping bills under Section 50(1). Provisions of Section 50(2) were contravened and the goods were liable to be confiscated under Section 113(i) of the said Act and since the exporter and other noticees colluded in the fraud, they were liable to penal action under Section 114 of the Act.
4. It was contended by the learned Counsel appearing on behalf of the appellant that the appellant was mentally sick and he could not have involved himself in this type of breaches. He submitted that there was no evidence except the statements recorded under Section 108 of the Customs Act for corroborating the allegations made against the appellant. Furthermore, the goods were already exported and, therefore, no proceedings could have been initiated against the appellant. It was also submitted that at the time of export, the valuation was not objected to. Moreover, since the goods were not prohibited goods, the provisions of Section 113(d) or (i) could not have been invoked in this case. It was also submitted that when the goods were not seized and were already exported, proceedings were misconceived.
4.1 The learned Counsel placed reliance on the following decisions in support of his contention :
(a) The decision of the Supreme Court in Commissioner of Customs (EP), Mumbai v. Prayag Exporters Pvt. Ltd. was cited for the proposition that Section 113(d) of the Customs Act would apply in cases of prohibited goods and cannot be invoked where the goods were not prohibited for export and no export duty was leviable on the goods.
(b) The decision of the Tribunal in Badri Prasad and Sons Pvt. Ltd. v. Collector of Customs, Delhi was cited for the proposition that when the goods were not prohibited for export, imposition of penalty under Section 114 was not justified. Shilpi Exports v. Collector of Customs, Calcutta was cited for the same proposition.
5. The learned authorised representative for the department supported the reasoning and findings of the impugned order and contended that the Supreme Court while construing the provisions of Section 113(d) has held in Om Prakash Bhatia v. Commissioner of Customs , which was rendered on 7-7-2003 after the decision in Prayag Exporters Ltd. (supra), that, if the conditions prescribed for import were not complied with it would be considered to be of prohibited goods. He submitted that though the decision was rendered in the context of the two particulars required to be stated under Section 18 of the Foreign Exchange Regulation Act, 1973, the ratio of the decision was applicable with equal force to the facts of the present case in view of the mis-declaration of the value of the goods, which was hit under Section 50 of the said Act. In para 18 of the judgment, the Supreme Court held that in cases where the export value is not correctly stated but there was intentional over-invoicing for some other purpose that is to say, not mentioning true sale consideration of the goods, then it would amount to violation of the conditions for import/export of the goods. It was held that the purpose may be money laundering or some other purpose, but it would certainly amount to illegal/unauthorised money transaction. In any case, over-invoicing of the export goods would result in illegal/irregular transactions in foreign currency. The learned authorised representative further submitted that there was no provision in the Customs Act to suggest that the liability that arose under Section 113 and 114 of the Act was extinguished with the export of the goods. In support of this submission, he placed reliance on the decision of the Calcutta High Court in Euresian Equipment and Chemicals Ltd. and others .
6. The record reveals that the appellant who was the proprietor of Va-runa Overseas had, in collusion with the others, exported cheap quality garments which were procured @ Rs. 14/- per piece, as admitted by Manish Yadav, and claimed drawback of Rs. 42.5 per piece which was not admissible to the exporter under Section 76(l)(b) of the Act. Since the drawback was not admissible it was recoverable under Rules 16, and 16A of the Duties of Drawback Rules 1995.
6.1 As regards the contention that the goods were not seized and they were already exported, and therefore, the decision in Om Prakash Bhatia (supra) was not applicable, it is clear, on the reading of the decision in Om Prakash (supra), that it was rendered on the basis of interpretation given to provisions of Section 113 (d) and it was clearly laid down that the prohibition of importation or exportation could be subjected to certain prescribed conditions to be fulfilled before or after clearance of goods. The falsity of the declaration which was required to be made under Section 50 of the said Act, was not wiped out merely by the goods having been successfully exported without the fraud being detected at that time.
7. On going through the relevant record and the impugned order, we are satisfied that the appellant has not made out any prima-facie case for waiver of the pre-deposit. It is, however, noticed, that though admittedly the appeallant Satyender Singh was the sole proprietor of Varuna Overseas, the Commissioner has imposed separate penalty on the proprietory concern M/s. Varuna Overseas of Rs. 5 lacs, and Rs. 2.5 lacs on its proprietor Satyender Singh. In our view, imposition of penalty on the sole proprietorship concern and simultaneously on the sole proprietor was prima-facie not justified and, there ought to be only one penalty to be imposed. Having regard to the facts and circumstances of the case, we direct that there shall be interim stay of the order of penalty only imposed on the appellant, on the condition that the appellant deposits Rs. 2.5 lacs (Rupees two lacs and fifty thousand only) within 8 weeks from today, failing which the appeal will stand dismissed. If, however, the amount is so deposited, the matter will come up for hearing in its due course. Post the matter for reporting compliance on 18-1-2006.
(Dictated in open court on 14-11-2005)