Imposition of penalty on the basis of mathematical variation is unsustainable

Siba International Vs Commissioner of Customs (CESTAT Mumbai) 

Facts of the case, in a nutshell, is that Appellant-Exporter Siba International was engaged in export of processed buffalo meat after procuring the same from M/s. Al-Azlan Frozen Foods, Moradabad (UP) an approved processing plant for export of boneless buffalo meat as a prescribed condition under Chapter 2 of Schedule 2 of the ITC (HS) Classification of Export and Import items requires the exporter to produce certificate from the designated veterinary authority as well as from the quality control and inspection authority, besides the facts that a declaration is required to be furnished with copies of authorised APEDA certificate to the effect that meat and meat products were sourced exclusively from APEDA registered meat processing plant M/s. Al-Azlan Frozen Foods was authorised by APEDA from 27.09.2012 to 31.03.2013 to process such meat for export and Appellant exported about 14862.737 MT of buffalo meat during that period. Departmental enquiry was conducted upon credible information. It revealed that processing capacity of M/s. Al­Azlan Frozen Foods, authorised by APEDA, was limited to 62 MT of meat per day and having regard to the period that covered total 185 days, it could at best have processed 11472 MT of buffalo meat against which 14862.737 MT was exported and drawback was received by the Appellant. It was, therefore, put to show-cause notice for exporting 3392.737 MT of meat in excess of its production capacity and to refund the drawback received alongwith interest and penalty under Section 114 for improper exportation of buffalo meat. Order-in-Original confirmed the demand but in the Order-in-Appeal, learned Commissioner (Appeals) had dropped the demand for return of drawback on the ground that no provision exist in the Customs Act for such recovery but confirmed the penalty under Section 114 of the Customs Act by reducing it from Rs.20,00,000/- to Rs.15,00,000/-, with appropriation of the said amount which was deposited by the Appellant during investigation.

Shri George N. D., Advocate vide letter dated 02.03.2015 filed defence reply on behalf of Notice M/s Siba International, wherein, they denied all the allegation made in SCN and inter-alia stated they were permitted to Process  Chilled Meat 40 MT and Frozen Meat 62 MT therefore, the  total quantity of meat processed could have been only 11470 MT is not correct as the said Calculation is on the  basis of Frozen Meat. The Chilled, Meat has not been considered. That being so the total Quantity available for export on the basis APEDA authorization was 18870 MT and the total Quantity exported is 14862.737 MT. Hence, there cannot be any Unlawful Processing or Export. Further, all the Exports were accompanied by Veterinary Health Certificate issued by the Government of India. There is no Mis declaration and / or any wilful Suppression. Therefore, there is no Unlawful Exports as alleged. However, on scrutiny of the shipping bills and respective invoices, it is crystal clear that description of the goods in each shipping bills as mentioned in Table-A, was declared as “Frozen Boneless Buffalo Meat”. Also, Shri Anees Ahmad common partner in both the firms M/s Al-A zlan Frozen Foods vide his statements had admitted that the quantity of 3392.737 MT buffalo meat was unlawfully exported, and they paid the amount of drawback availed on the impugned quantity of exported buffalo meat. Thus, I find that goods under export covered under shipping bills included in the subject Show-Cause Notice were ‘Frozen Boneless Buffalo Meat’. Therefore, submission made by the noticee that the  Chilled meat was not considered appears an afterthought and cannot be accepted at this juncture.

However, the ground of rejection of the said submissions, that could be inferred from the sub paragraph of para 27 is that in the shipping bills, goods were described as frozen boneless buffalo meat as per Table A perhaps annexed to the show-cause notice and reproduced in the Order-in-Original but not filed in the appeal memo. On the contrary, show-cause notice did not propose for any action concerning mis-declaration in the shipping bills or propose any penalty, for which discussion on the same is outside the purview of this appeal, besides the fact that not a single shipping bill is annexed to the show-cause notice to substantiate that description of goods exported was different. Since nowhere during adjudication, the Appellant had ever averred that it had exported only frozen meat and as Note 6 has not kept the category of export of meats to frozen one only, there is no basis in the claim made by the Department. This being facts on record and having regard to the fact that Respondent-Department had not taken into consideration the entire production capacity of M/s. Al-Azlan Frozen Foods and confined it to 62 MT meat to presume such mis-declaration though it is only in respect of frozen buffalo meat only, imposition of penalty on the basis of mathematical variation is unsustainable in law and facts.

FULL TEXT OF THE CESTAT MUMBAI ORDER

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