Janani International Pvt. Ltd. Vs Commissioner of Customs (CESTAT Chennai)
Conclusion: Penalties imposed on appellant and its Managing Director for allegedly availing excess duty drawback by understating freight charges in export shipping bills was set aside as appellant had not made any mis-declaration in the shipping bills filed by them, they had not rendered the export goods liable for confiscation.
Held: Appellant firm exported 100% cotton grey made-ups to UK, Sri Lanka etc. on CIF basis under drawback Shipping Bills during the period 2007-08 to 2011-12 and availed drawback based on FOB value of the goods which was calculated by deducting the freight amount declared in the shipping bill and the insurance amount, if any, from the CIF / C&F value of the goods. The officers of Directorate of Revenue Intelligence gathered specific intelligence that the appellant availed undue drawback by mis-declaration of the actual freight paid for the said export consignments. Investigation conducted by DRI revealed that the actual freight paid to the liners / freight forwarders was more than the freight declared in the shipping bills filed by the appellant. Upon completion of investigation, a show cause notice was issued to the appellant by the Additional Director with the proposals to (i) reject the freight paid declared in the shipping bills and adopt the actual freight paid to arrive at the actual FOB value; (ii) deny the excess ineligible drawback amount of Rs. 10,19,720/- availed on account of mis-declaration of freight against shipping bill (iii) demand the applicable interest (iv) confiscate the impugned goods exported with the total value of Rs. 34,76,38,722/- under Section 113(i) (v) appropriate the amount of Rs. 15,69,401/- paid by the appellant during the course of investigation; and (vi) impose penalty separately on the appellant firm and the Managing Director of the appellant firm under Section 114 and 114AA of the Customs Act, 1962. The Original Authority upheld all the proposals in the show cause notice and imposed penalties of (a) Rs.2,00,000/- and Rs. 50,000/- on the appellant firm under Sections 114 and 114AA of the Customs Act, 1962 respectively; and (b) Rs. 50,000/- and Rs. 25,000/- on the Managing Director of the appellant firm under Sections 114 and 114AA of the Customs Act, 1962 respectively. However, the original adjudicating authority refrained from imposing any redemption fine in the absence of availability of the goods for confiscation. Appellant firm and the Managing Director of the appellant firm carried the matter in appeal in so far as it related to imposition of penalties on them under Section 114 and 114AA of the Customs Act, 1962 and the appeal was rejected by the Commissioner of Customs & Central Excise. The issue was whether the appellant firm and the Managing Director of the appellant firm were liable for penalty under Section 114 and Section 114AA of Customs Act, 1962 due to excess claim and availment of duty drawback on the exports made by the appellant firm by declaration of average freight in the shipping bills which was subsequently found upon investigation conducted by the officers of Directorate of Revenue Intelligence to be less than the actual freight incurred. Department maintained that assessee had wrongly declared the freight amount and continued to avail ineligible excess drawback fraudulently. She further contended that the Managing Director of the appellant firm never informed Customs about the undue receipt of drawback on account of mis-declaration of freight. It was held that the show cause notice, order of the adjudicating authority and the order passed by the lower appellate authority were all conspicuously silent as to whether 10-15% of such drawback claims were checked and if so, how the case of the appellant was never checked by Customs officers until it was detected by officers of Directorate of Revenue Intelligence that the actual freight borne by the appellant was higher than the freight declared in the shipping bills. Under the circumstances, the allegation of willful mis-declaration / false declaration of freight with the intention to claim excess drawback was far-fetched as the appellants were not in a position to prevent the Customs officers from taking up their claim for test check as mandated in para 3 of the Board’s Circular No. 44/2000-Customs. There was no basis for holding that the appellants have mis- declared the freight in the shipping bills filed by them. Therefore, the question of knowingly or intentionally making a false declaration did not even arise. Since the appellant had not made any mis-declaration in the shipping bills filed by them, they had not rendered the export goods liable for confiscation. Therefore, penalty could not be imposed on the appellant under Section 114 of Customs Act, 1962. Further, appellants had not knowingly made any false declaration in the shipping bills filed by them. Hence penalty could not be imposed on them under Section 114AA of Customs Act, 1962.
