Custom, Excise & Service Tax Tribunal
Sartaj International vs Commissioner, Customs-New Delhi(Icd ... on 6 January, 2026
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNAL
NEW DELHI
PRINCIPAL BENCH- COURT NO. I
CUSTOMS APPEAL NO. 55550 OF 2023
(Arising out of Order-in-Appeal No. Export/ICD/TKD 18/2019-20/115 dated 06.04.2022
passed by the Commissioner of Customs, Export, ICD TKD, New Delhi)
M/s Sartaj International .....Appellant
53, Udyog Vihar, Phase-6,
Sector-37, Gurgaon, Haryana
Versus
Commissioner of Customs, .....Respondent
ICD, (Export), Tughlakabad, New Delhi APPEARANCE:
Shri B.L. Narasimhan, Ms. Kruti Parashar and Ms. Aditi Sharma, Advocates for the Appellant Shri Rajesh Singh, Authorized Representative of the Department CORAM: HON'BLE MR. JUSTICE DILIP GUPTA, PRESIDENT HON'BLE MR. P.V. SUBBA RAO, MEMBER (TECHNICAL) DATE OF HEARING: 16.07.2025 DATE OF DECISION: 06.01.2026 FINAL ORDER NO. 50002/2026 JUSTICE DILIP GUPTA:
M/s Sartaj International 1 has filed this appeal for setting aside the order dated 06.04.2022 passed by the Commissioner of Customs (Appeals) 2. The appeal was filed against the order dated 31.03.2019 passed by the Additional Commissioner of Customs holding that the goods exported through two shipping bills are liable to confiscation under section 113(d),(g) and (i) of the Customs Act, 1962 3. The Additional Commissioner confirmed the recovery of drawback in respect of the two shipping bills and also imposed a penalty of Rs. 5 lakhs upon the appellant under section 114(iii) of the Customs Act and a penalty of Rs. 5 lakhs under section 114AA of the Customs Act. The Commissioner (Appeals) has
1. the appellant
2. the Commissioner (Appeals)
3. the Customs Act 2 C/55550/2023 upheld the order passed by the Additional Commissioner, except to the extent that the recovery of drawback has been set aside.
2. The appellant had filed two shipping bills for export of readymade garments claiming benefit of Focus Market Scheme. The shipping bills had declared the port of destination and the country of destination as Mogadishu and Somalia. The investigation revealed that the goods were diverted to Jebel Ai in UAE by fraudulently amending TR-1 and TR-2 copies of the shipping bills with the help of Nitin Gupta, Director of M/s Oak Shipping Services Pvt Ltd. It was also noticed that the change of destination country and port of discharge was done without due authentication by the Customs Superintendent.
3. A show cause notice dated 01.03.2017 was issued to the appellant calling upon the appellant as to why:
(i) The goods exported vide 02 Shipping Bills as per Annexure "A" to this Notice having total FOB value of Rs.
74,77,846/- should not be confiscated under Section 113(d), (g) and (i) of the Customs Act, 1962;
(ii) The drawback of Rs. 5,30,928/-availed by the Exporter in respect of 02 Shipping Bills as per Annexure "A" to this Notice should not be recovered from them under Rule 16 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995;
(iii) Interest in respect of ineligible drawback of Rs. 5,30,928/-
availed by the exporter should not be recovered from them under Section 75A of the Customs Act, 1962;
(iv) Penalty under Section 114 of the Custom Act, 1962 should not be imposed upon them for their act of omission and commission as discussed herein above;
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C/55550/2023
(v) Penalty under Section 114AA of the Customs Act, 1962 should not be imposed upon them for their act of omission and commission as discussed herein above; and
(vi) The amount of Rs.56,100/- deposited vide TR-6 challan No. 34453 dated 17.12.2015 as penalty should not be appropriated against the said demand of penalty as proposed above.
4. The appellant filed a detailed reply and denied the allegations made therein. The appellant contented that a duty drawback had been correctly availed as there was no bar and that the goods could not have been confiscated under section 113 of the Customs Act or penalty imposed under section 114(iii) and 114AA of the Customs Act.
5. The Additional Commissioner, however passed the order dated 13.03.2019. The first issue that was framed for adjudication by the Additional Commissioner is:
(i) Whether M/s Sartaj International (Noticee No. 1) fraudulently diverted their export consignments covered under 02 Shipping Bills (as detailed in Annexure-A to the show cause notice) originally destined for export to Mogadishu, Somalia, a country notified under Focus Market Scheme(FMS)/Merchandise Export from India Scheme (MEIS), to the changed "Country of Destination"
i.e. Jebel Ali (United Arab Emirates), which was not a notified country under Focus Market Scheme(FMS)/Merchandise Export from India Scheme (MEIS), to avail undue benefit of FMS/SFMS/MLFPS/MEIS?
6. In this connection, the finding recorded by the Additional Commissioner is:
4
C/55550/2023 "21. I find that during investigations, the concerned Shipping Line M/s Carvel Logistics Pvt. Ltd, who had transported the goods of M/s Sartaj International (Noticee No. 1) in their containers to Jebel Ali(UAE), had submitted copies of Bills of Lading and certified copies of Shipping Bills No. 8254817 and 8254819 both dated 18.03.2015, pertaining to the said Bill of Lading, available with them wherein the port of destination was amended and it was found that there were manual amendments in handwriting of some unknown person on the first page of each above said TR-1/TR-2 copies of Shipping Bills with regard to "Port of Discharge" and "Country of Destination"; that originally, Mogadisu was mentioned as "Port of Discharge" and Somalia was mentioned as "Country of Destination", which were found to be stricken out manually. Further, Jebel Ali against "Port of Discharge" and Dubai against "Country of Destination" were found to be endorsed by some sort of signature and a stamp of Superintendent of Customs, Export Shed, ICD, TKD."
7. Thereafter, the Additional Commissioner considered the statements of Nitin Gupta, Director of M/s Oak Shipping Services Pvt Ltd., Shri Prashant Kumar, Branch Manager of M/s Caravel Logistics Pvt Ltd, Jasjit Singh Chhabra, Proprietor of the appellant made under section 108 of the Customs Act and recorded the following findings:
"22. I find that netiher Shri Nitin Gupta, Director of M/s Oak Shipping Services Pvt Ltd (Noticee No.-2) nor Shri Jasjit Singh Chhabra, Proprietor of M/s Sartaj International (Noticee No.-1) whose statements have been relied upon in the impugned show cause notice, had ever retracted their said statements and for admissibility of statements recorded under Section 108 of the Customs Act, 1962, law is well settled xxx xxx xxx and hence said admittal statements have evidentiary value."
8. The Additional Commissioner then recorded the following findings: 5
C/55550/2023 "23. I find that the above plausible and un rebutted evidences on record, clearly prove that in both the Shipping Bills pertaining to export of Cotton made ups, the TR-1/TR-2 copies of the shipping bills were fraudulently amended with the help of Shri Nitin Gupta, Director of M/s Oak Shipping Services Pvt Ltd(Noticee No.-2) on the direction of Shri Jasjit Singh Chhabra, Proprietor of M/s Sartaj International (Noticee No.-1) and the goods were actually exported to Jebel Ali (United Arab Emirates), which is not a notified country under Merchandise Export from India Scheme (MEIS)/FMS."
9. The second issue that was framed by the Additional Commissioner is:
(ii) Whether the goods exported vide 02 Shipping Bills as per Annexure-A to the show cause notice having total FOB value of Rs. 74,77,846/- are liable to confiscation under Section 113(d), (g) and (i) of the Customs Act, 1962?
10. The findings recorded by the Additional Commissioner on this issue is:
"24. I find that, as discussed in the foregoing paras, it has been established on record that M/s Sartaj International (Noticee No.-1) had filed 02 Shipping Bills for export of Cotton made ups to Mogadisu, Somalia for claiming benefits of Focus Market Scheme at the rate of 3% whereas the goods were diverted to Jebel Ali, United Arab Emirates by making fraudulent amendments in the TR-1 and TR-2 copies of the Shipping Bills and this was done wilfully by M/s Sartaj International ( Noticee No. 1) with the help of Shri Nitin Gupta, Director of M/s Oak shipping Services Pvt Ltd( Noticee No.-2). I find that the goods were actually exported to Jebel Ali, United Arab Emirates whereas as per Shipping Bills, the goods were to be exported to Mogadisu, Somalia and hence, the goods did not correspond with the material particulars with regard to their "Port of Discharge" and "Country of Destination" as furnished by the Noticee No. 1 in the respective Shipping Bills filed under Section 50 of the Customs Act, 1962. Therefore, the goods exported 6 C/55550/2023 through 02 fraudulently amended Shipping Bills, are liable for confiscation under sub-section (i) of the Section 113 of the Customs Act, 1962. Further, the Let Export Order issued by the proper officer in respect of these 02 fraudulently amended Shipping Bills, was in relation to export of the goods to Mogadisu, Somalia, whereas the goods were actually exported to Jebel Ali, United Arab Emirates without permission of the proper officer under Section 51 ibid and hence, the said goods are also liable for confiscation under sub-section (g) of the Section 113 of the Customs Act, 1962. Moreover, the goods related to these 02 Shipping Bills had been exported to Jebel Ali by using fraudulently amended Shipping Bills whereas Rule 14 of Foreign Trade (Regulation) Rules, 1993 clearly prohibits for employing any corrupt or fraudulent practice for the purpose of exporting any goods or obtaining any license. Therefore, the said goods are also liable for confiscation in terms of Sub-Section (d) of Section 113 of the Customs Act, 1962. Thus, I hold that the export goods covered under these 02 fraudulently amended Shipping Bills, having the total FOB value of Rs. 74,77,846/- as detailed in Annexure "A" to the impugned show cause notice, are liable for confiscation under sub-sections (d), (g) and (i) of Section 113 of the Customs Act, 1962 and M/s Sartaj International (Noticee No.-1)) have rendered themselves liable to penal action under Section 114(iii) of the Customs Act, 1962 for the above said acts of omission and commission."
11. The third issue framed by the Additional Commissioner is:
(iii) Whether the drawback of Rs. 5,30,928/- availed by M/s Sartaj International (Noticee No. 1) is required to be recovered from them under Rule 16 of Customs, Central Excise Duties and Service Tax Drawback Rules, 1995 alongwith applicable interest in terms of Section 75A of the Customs Act, 1962?
12. The finding recorded on this issue is:
7
C/55550/2023 "26. Therefore, the very basis for claiming the duty drawback in these cases were Custom Cleared Shipping Bills which had different particulars declared with regard to "Port of Discharge" and "Country of Destination" than they were actually shipped/exported to; that the goods related to these 02 fraudulently amended Shipping Bills were not having permission for export under Section 51 of the Customs Act, 1962 for the destination to which they were actually exported. I find that as per sub-rule (1) of Rule 13 of the Customs, Central Excise Duties and Service Tax Drawback Rules, 1995, it was the basic requirement to claim the drawback and the exportation of said goods by the Noticee No. 1 to a destination not approved by the Customs officer in the shipping bills so filed by them, was an act of smuggling in terms of definition of "Smuggling" provided in sub-section (39) of Section 2 of the Customs Act, 1962. I find that the export related benefits, including Duty Drawback cannot accrue on such act of smuggling. I further find that the goods covered under the 02 fraudulently amended Shipping Bills are liable for confiscation and unless the same are redeemed on payment of redemption fine as decided by the adjudicating authority or released unconditionally, the same cannot be technically termed as exported and hence M/s Sartaj International (Noticee No.-1) were not eligible for any export related benefits, including duty drawback, in respect of these 02 fraudulently amended Shipping Bills."
13. The fourth issue framed by the Additional Commissioner is:
(iv) Whether the Noticees are liable to penal action, as proposed in the impugned show cause notice?
14. The finding recorded is:
"27. So far as the issue No. (iv) above i.e. whether the Noticees are liable to penal action, as proposed in the impugned show cause notice, is concerned, I have already held in the foregoing paras that the export goods covered under these 02 fraudulently amended Shipping Bills, having the total FOB value of Rs. 74,77,846/-, are liable for confiscation under sub-8
C/55550/2023 sections (d), (g) and (i) of Section 113 of the Customs Act, 1962 and that M/s Sartaj International (Noticee No.-1) have rendered themselves liable to penal action under Section 114(iii) of the Customs Act, 1962 for their acts of omission and commission xxxxxx.
28. The impugned show cause notice also proposes imposition of penalty under Section 114AA of the Customs Act, 1962 on Noticees Nos. 1 and 2. I find that it has been established on record that M/s. Sartaj International (Noticee No. 1) had tried to get the Focus Scrips in respect of the 02 fraudulently amended Shipping Bills by directing his freight forwarder to fraudulently amend them and thereby diverted the export goods to the country not notified under Focus Market Scheme/MEIS. I further find that Shri Jasjit Singh Chhabra, Proprietor of M/s Sartaj International (Noticee No.-1), was concerned with filing of these 02 Shipping Bills which were having incorrect material particulars with regard to "Port of Discharge" and "Country of Destination" in as much as he himself had directed Shri Nitin Gupta for making fraudulent amendments in these 02 Shipping Bills with regard to "Port of Discharge" and "Country of Destination". Thus, I hold that the Noticees Nos. 1 and 2 are liable to penal action under Section 114AA of the Customs Act, 1962."
15. Learned counsel for the appellant made the following submissions:
(i) Statements made under section 108 of the Customs Act cannot be considered as relevant since the procedure prescribed under section 138B of the Customs Act was not followed;
(ii) Goods were not liable to confiscation under section 113(d),
(g) and (i) of the Customs Act;
(iii) In any case, goods can be confiscated under section 113 of the Customs Act if they "attempted to be exported"
improperly and not in respect of goods which have already been exported. In the present case, the goods had already been exported before investigation was conducted in respect 9 C/55550/2023 of shipping bills in which Let Export Orders had also been issued; and
(iv) As drawback has been allowed considering the goods to have been exported legally, it cannot be said that the goods were smuggled goods and liable to confiscation.
16. Learned authorized representative appearing for the department, however, supported the impugned order and made the following submissions:
(i) The appellant fraudulently diverted the goods intended for export to Somalia to Jebel Ali, UAE to wrongfully claim benefits under the Focus Market Scheme;
(ii) The goods exported are liable to confiscation as they were exported using fraudulent documentation and were not cleared for export to the actual destination port; and
(iii) Penalties have been correctly imposed on the appellant and Praveen Rao.
17. It is seen that the first issue decided by the Additional Commissioner is whether the appellant had fraudulently diverted the export consignments covered under 2 Shipping Bills originally destined for export to Mogadisu in Somalia but diverted to Jebel Ali which is not a notified country under the Focus Market Scheme to avail undue benefits of focus market scheme. This finding has been recorded merely on the basis of statements made by various persons under section 108 of the Customs Act.
18. The contention of the learned consultant for the appellant is that these statements cannot be considered as relevant as the procedure 10 C/55550/2023 contemplated under section 138B of the Customs Act had not been followed. This contention deserves to be accepted.
19. In this connection, reference can be made to the decision of the Tribunal in M/s Surya Wires Pvt. Ltd. vs. Principal Commissioner, CGST, Raipur 4. The Tribunal examined the provisions of sections 108 and 138B of the Customs Act as also the provisions of sections 14 and 9D of the Central Excise Act, 1944 and observed as follows:
"21. It would be seen section 14 of the Central Excise Act and section 108 of the Customs Act enable the concerned Officers to summon any person whose attendance they consider necessary to give evidence in any inquiry which such Officers are making. The statements of the persons so summoned are then recorded under these provisions. It is these statements which are referred to either in section 9D of the Central Excise Act or in section 138B of the Customs Act. A bare perusal of sub-section (1) of these two sections makes it evident that the statement recorded before the concerned Officer during the course of any inquiry or proceeding shall be relevant for the purpose of proving the truth of the facts which it contains only when the person who made the statement is examined as a witness before the Court and such Court is of the opinion that having regard to the circumstances of the case, the statement should be admitted in evidence, in the interests of justice, except where the person who tendered the statement is dead or cannot be found. In view of the provisions of sub-section (2) of section 9D of the Central Excise Act or sub-section (2) of section 138B of the Customs Act, the provisions of sub-section (1) of these two Acts shall apply to any proceedings under the Central Excise Act or the Customs Act as they apply in relation to proceedings before a Court. What, therefore, follows is that a person who makes a statement during the course of an inquiry has to be first examined as a witness before the adjudicating authority and thereafter the adjudicating authority has to form an opinion
4. Excise Appeal No. 51148 of 2020 decided on 01.04.2025 11 C/55550/2023 whether having regard to the circumstances of the case the statement should be admitted in evidence, in the interests of justice. Once this determination regarding admissibility of the statement of a witness is made by the adjudicating authority, the statement will be admitted as an evidence and an opportunity of cross-examination of the witness is then required to be given to the person against whom such statement has been made. It is only when this procedure is followed that the statements of the persons making them would be of relevance for the purpose of proving the facts which they contain."
(emphasis supplied)
20. After examining various judgments of the High Court and the Tribunal, the Tribunal observed as follows:
"28. It, therefore, transpires from the aforesaid decisions that both section 9D(1)(b) of the Central Excise Act and section 138B(1)(b) of the Customs Act contemplate that when the provisions of clause (a) of these two sections are not applicable, then the statements made under section 14 of the Central Excise Act or under section 108 of the Customs Act during the course of an inquiry under the Acts shall be relevant for the purpose of proving the truth of the facts contained in them only when such persons are examined as witnesses before the adjudicating authority and the adjudicating authority forms an opinion that the statements should be admitted in evidence. It is thereafter that an opportunity has to be provided for cross-examination of such persons. The provisions of section 9D of the Central Excise Act and section 138B(1)(b) of the Customs Act have been held to be mandatory and failure to comply with the procedure would mean that no reliance can be placed on the statements recorded either under section 14D of the Central Excise Act or under section 108 of the Customs Act. The Courts have also explained the rationale behind the precautions contained in the two sections. It has been observed 12 C/55550/2023 that the statements recorded during inquiry/investigation by officers has every chance of being recorded under coercion or compulsion and it is in order to neutralize this possibility that statements of the witnesses have to be recorded before the adjudicating authority, after which such statements can be admitted in evidence."
(emphasis supplied)
21. In this view of the matter, the statements recorded under section 108 of the Customs Act cannot be considered as relevant.
22. The second and fourth issues framed by the Additional Commissioner were whether the goods were liable to confiscation under section 113(d),(g) and (i) of the Customs Act and whether penalty could be imposed under section 114(iii) and 114AA of the Customs Act. The second issue has been decided on the basis of the findings recorded by the Additional Commissioner while deciding the first issue since a finding has been recorded that the goods exported under the 2 Shipping Bills were fraudulently amended and were liable to confiscation. This finding, therefore, cannot be sustained as the first issue has been decided in favour of the appellant.
23. This apart, section 113 on the Customs Act deals with confiscation of goods attempted to be improperly exported. In the instant case, as noticed above, the goods had already been exported on the basis of Let Export Orders and the investigation was started later. Section 113 of the Customs Act would not, therefore, be applicable.
24. In this view of the matter, penalty under section 114(iii) of the Customs Act could not have been imposed upon the appellant since penalty is imposed for attempt to export goods improperly. In any view of the matter, as the goods have been held not liable to confiscation under 13 C/55550/2023 section 113, penalty could also not be imposed under section 114(iii) of the Customs Act.
25. Section 114AA of the Customs Act provides that if a person knowingly or intentionally makes, signs or uses or causes to be made, any material particular, in the transaction of any business for the purposes of the Customs Act, shall be liable to a penalty not exceeding five times the value of goods. The Additional Commissioner has relied upon the statement made under section 108 of the Customs Act that the changes were made on the instructions given by the appellant. This statement, for the reasons stated above, cannot be relied upon as evidence. Thus, penalty under section 114AA of the Customs Act could not have been imposed upon the appellant.
26. The Commissioner (Appeals) were also relied upon the statements of Nitin Gupta and Jasjit Singh Chhabra to hold that the appellant had mala fide intention to change the "Country of Destination". Imposition of penalty has also been confirmed on the basis of statements made by the appellant. These statements could not have been considered as relevant as the procedure contemplated under section 138B of the Customs Act had not been followed.
27. It needs to be also remembered that insofar as the transaction between the exporter and the overseas buyer is concerned, if the goods are sold on FOB basis, the title shifts to the buyer. It is also true that once the Let Export Order is issued, the exporter may not have control over the goods. However, it also needs to be noted that insofar as the scrips under the Focus Market Scheme are concerned, the exporter will be entitled to these scrips if and only if the goods reach the destination market and not otherwise. The only beneficiary under this Scheme is the exporter. It is 14 C/55550/2023 not the overseas buyer or the freight forwarder or the Shipping Line. Paragraph 3.20.3 of the Handbook of Procedures specifically requires the exporter who applies for scrips under the FMS to submit, inter alia, one of the following documents as a proof of landing of export consignment in specified Focus Market:
(i) A self-attested copy of import bill of entry filed by importer in specified market, or
(ii) Delivery order issued by port authorities, or
(iii) Arrival notice issued by goods carrier, or
(iv) Tracking report from the goods carrier duly certified by them, evidencing arrival of export cargo to destination Focus Market, or
(v) Lorry receipts for transportation of goods from Port into the Focus Market, or
(vi) For Land locked Focus Market, Lorry receipts of transportation of goods from Port to Land locked Focus Market, or
(vii) Any other documents that may have satisfactorily prove to RA concerned that goods have landed in/reached the Focus Market.
28. Clearly, if the exporter applied for FMS scrips, it is the responsibility of the exporter to ensure that the goods reach that market and to produce proof as above. The responsibility of the exporter does not end with obtaining the Let Export Order. In this case, neither side produced before us the documents which were produced as proof that the goods reached the Focus Market. The Customs authorities investigating the matter should have summoned the relevant documents from the DGFT. Either the goods must have reached the Focus Market or if they were diverted, the exporter may have submitted fake documents as proof of landing or the DGFT may have issued the scrips without obtaining the proof of landing. The impugned order, however, does not address this issue. 15
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29. Thus, for all the reasons stated above, the impugned order dated 06.04.2022 passed by the Commissioner (Appeals) confiscating the goods and imposing the penalties upon the appellant deserves to be set aside and is set aside. The appeal is, accordingly, allowed.
(Order Pronounced on 06.01.2026) (JUSTICE DILIP GUPTA) PRESIDENT (P.V. SUBBA RAO) MEMBER (TECHNICAL) Shenaj