Artisan’s Welfare Society Vs Commissioner of Customs (CESTAT Chennai)
The Artisan’s Welfare Society filed an appeal before CESTAT Chennai against the penalties imposed for attempting to export red sander wood in the form of pillar tops, in violation of the Customs Act and the Foreign Trade Act. The society contended that they were unaware of the nature of the wood used in the products and that the penalties were excessive.
Customs officials intercepted the goods during examination, suspecting the use of red sander wood. The society argued that they purchased the items from local traders, believing them to be made of country wood. They contended that they had no knowledge of the red sander wood used and attempted to export the goods as per the order.
The CESTAT acknowledged that the goods were liable for confiscation and that the society was negligent. However, they found no evidence of deliberate wrongdoing or false declarations. Thus, the penalties imposed under Section 114(i) and 114AA of the Customs Act were reduced.
CESTAT Chennai partially allowed the appeal, reducing the penalty imposed on the Artisan’s Welfare Society for attempting to export red sander wood. The decision highlighted the importance of penalties being proportionate to the offense and emphasized the need for awareness and diligence in export transactions.
FULL TEXT OF THE CESTAT CHENNAI ORDER
Brief facts are that the appellant filed shipping bill dt. 09.12.2011 through the CHA for export of ‘cupboards, pillar tops, table, book shelf, and wooden pillars’. The value of goods was declared as USD 6420 CIF and the same were sought to be exported to M/s.Southeast Packaging & Printing Development Co Ltd., China by filing free shipping bills without claiming any export incentives. Based on specific intelligence, the officers of SIIB, Custom House, Tuticorin inspected the goods. During the examination conducted along with Forest Range Officer, it was noticed that wooden pillars were made out of red sanders. Representative samples were taken from the lot and sent for analytical test for confirmation. On the reasonable belief that wooden pillars are made out of red sanders wood and are attempted to be smuggled out of the country in contravention of the provisions of the Customs Act, 1962 read with Foreign Trade (Development and Regulation) Act, 1992, Foreign Trade Policy 2009-14 and ITC (HS) Schedule 2, the 438 numbers of wooden pillars along with 4 nos. of cupboards and 2 nos. of bookshelves were detained under a mahazar dt. 16.12.2011 and deposited with Raja Agencies, CFS, Tuticorin for safe custody. After due process of law, the original authority absolutely confiscated the red sanders valued at Rs.33,90,000/- under Section 113 (d) of the Customs Act, 1962. The appellant was given an option to redeem the other goods viz. Cupboards, Pillar tops, Table, Book shelf valued at Rs.10,800/- on payment of redemption fine of Rs.15,000/- under Section 125 of Customs Act, 1962. A Penalty of Rs.30,00,000/- was imposed on the appellant (exporter) and a separate penalty of Rs.2 lakhs was imposed on the CHA under Section 114 (i) and 114AA of Customs Act, 1962. Aggrieved by the order passed by the original authority, the appellant preferred appeal before the Commissioner (Appeals) who vide order impugned herein upheld the same. Hence this appeal.
2. Ld. Counsel Sri S. Murugappan appeared and argued for the appellant. It is submitted that the appellant is a registered society which is registered under the Societies Registration Act, 1960. The society is established for the welfare of local artisans for marketing handmade goods and handicrafts. They are merchant exporter for goods for which mostly visiting foreigners to Auroville place order on them. After examination, it was noticed that the reddish brown wooden pillars painted black and wrapped with kraft paper was made out of red sanders. It is submitted by the Ld. Counsel that statements were recorded from the appellant-society viz. Sri V. Ramesh who is the Treasurer of the Society and Sri M. Siradudheen who was the person from whom the appellant had purchased the wooden pillars. There is nothing incriminating brought out in the statements. It can be seen from the perusal of statement of Sri V. Ramesh made on 13.02.2012 that the pillars were purchased in and around Karaikudi where these pillars were dismantled from old houses; that he initially thought that these were made up of country wood and the carpenter who worked in their society stated that these items were made of country wood only. Therefore, the appellant decided to export the pillars to his customer in China; that at the time of purchase itself, these pillars were painted black and he did not make any alteration and these pillars were to be exported as such. It is argued by the Ld. Counsel that it is an admitted position that the pillars in question were purchased in and around Karaikudi where these pillars were dismantled from old house in that area. The show cause notice does not attribute any knowledge on the appellant as to the species of the wood. Show cause notice also does not allege that the appellant with such knowledge has deliberately attempted to export the goods. Further, there is no contradiction in the statement of Sri V. Ramesh and Sri M. Sirasudheen and they have stated that the pillars were purchased from dismantled houses in and around Karaikudi. Further, the Ld. Counsel submitted that appellant is not challenging the confiscation of the goods. The contest in the appeal is confined only on the imposition of penalty on the appellant.
3. Para-40 of the impugned order was adverted to by the Ld. Counsel to argue that the original authority has held that Sri M. Sirasudheen, who is the person who arranged for purchase of pillars, had no knowledge that the pillars were made of red sanders wood. While so, there was no reason to uphold the penalty on the appellant treating the appellant differently. The adjudicating authority has concluded without any iota of evidence that appellant deliberately attempted to export the goods which were rendered liable for confiscation. The appellant had no knowledge that the goods were made of red sanders and only after verification by the officers came to know that the pillars are made of red sanders.
4. Further, the export of red sanders is not prohibited and it requires a license for export. There is no evidence to show that the appellant had consciously involved in the act of attempt to export red sanders. Ld. Counsel submitted that the original authority has imposed penalty of Rs.30 lakhs on the appellant. The said penalty is a combined penalty imposed under Section 114 (i) and 114 AA of the Customs Act, 1962. There cannot be such imposition of combined penalty and the original authority ought to have given separate reasoning for imposing penalty under different provisions of the Customs Act. Further, Ld. Counsel pleaded that penalty imposed is exorbitant and disproportionate. There is no proposal in the SCN to reject the transaction value adopted by the appellant. Since the value is accepted, there was no ground to adopt the value arbitrarily so as to impose penalty. It is pleaded that the penalty may be set aside.
5. A.R Sri R. Rajaraman appeared for the Department and argued that the findings in the impugned order were well supported. It is submitted that merely because Sri M. Sirasudheen was exonerated, it cannot be concluded that the appellant had no role in the attempt to smuggle red sanders. The incident would not have come to light but for the inspection conducted by the officers of the department that too on the basis of specific intelligence. It is submitted that the penalties imposed are legal and proper.
6. Heard both sides.
7. On perusal of the records in the appeal, it is clear that there was an attempt to export Red Sander Wood in the form of pillar tops which were painted black in contravention of the prohibition imposed under the provisions of the Customs Act and the Foreign Trade (Development Regulation) Act, 1992. The exporter’s contention that these goods are only restricted and not prohibited is not acceptable in view of the statutory provisions of the Foreign Trade (Development Regulation) Act, 1992 as extracted below:-
“c) Schedule 2 of ITC (HS) gives the item wise export policy. Sl. No. 154 of the Schedule details the export policy with regard to red sanders wood in any form. The export policy provides that the export of red sanders is ‘prohibited’. The nature of the restriction is described as ‘not permitted to be exported’.
