By TIOL News Service

MUMBAI, JAN 05, 2015: M/s Elit imported polyester knitted fabrics under DEEC scheme. For issuance of the DEEC certificate from DGFT, the appellant issued a Chartered Accountant certificate. Those certificates were taken as evidence of the financial turn-over for the purpose of issue of licence.

M/s. Elit contravened the licensing provisions by which huge amount of Customs duty was evaded. On the issuance of the false certificate by the appellant CA, the adjudicating authority imposed a penalty of Rs.2.00 lakhs u/s 112 (a) of Customs Act, 1962 and this penalty was maintained by Commissioner (Appeals).

So, the appellant is before the CESTAT.

It is submitted that the appellant Chartered Accountant issued the certificate in regard to the turnover of the company for the year 1998-1999, 1999-2000 and 2000-2001 in his professional capacityon the basis of documents of M/s. Elit produced by Shri Giresh Matelia . Inasmuch as since the certificate was issued in good faith and in his professional capacity, the appellant should not have been implicated in the case of contravention of provisions of Customs Act by which the Customs duty evasion has taken place; that he is not the party to fraud committed by M/s. Elit .

The Bench observed -

++ I find that the fact is not under dispute that the appellant had issued the certificate which was proved to be false. As regards the submission of the learned Counsel that certificates were issued on the basis of documents produced by M/s. Elit, it has been admitted that the documents submitted by M/s. Elit was unsigned and not audited.

++ As a Chartered Accountant he is duty bound to issue any certificate only on the basis of audited books of accounts. From the records, it is a fact that the certificate was issued by the Chartered Accountant without having any audited balance sheet or books of accounts. It is clear from the fact that the appellant has intentionally and very consciously certified the export turn over during the period 1998-99, 1999-2000 and 2000-2001.

The CESTAT, thereafter, extracted the findings of the adjudicating authority wherein it is inter alia observed -

+ I find that Shri MD Gala, Chartered Accountant, at the instance of Shri Girish Matalia, issued a false certificate stating that M/s. Elit had exported goods valued (i) Rs.13.29 lakhs in the financial year 1998-99 (ii) Rs.24.84 lakhs in 1999-2000 and (iii) Rs.105.66 lakhs in 2000-2001 whereas actual exports made by M/s. Elit was Rs.106.66 lakhs only in the year2001-2002 and there were no export prior to that.

+ Ifind that he had neither checked relevant purchase documents nor export documents but blindly issued the certificate at the instance of ShriGirishMatalia for an undisclosed consideration.

+ I find that by issuing the said false certificate he facilitated imports by M/s. Elit without need of bank guarantee and thus became a party to the fraud to cheat the Government revenue.

+ Though he has claimed that he issued the certificates in his professional capacity, I find that before certifying the said export, it was his duty to verify the correctness of the documents placed before him. I find that Mahesh Pathek has stated in his statement that the said certificates were issued by Shri Gala even though no such exports were physically made by him in the name of M/s. Elit or any other firm.

+ I also find that Shri Gala has himself admitted that proprietor Shri Mahesh Pathak's signature was not there on the documents when he audited the documents of M/s. Elit. Thus, I find that Shri Gala has indiscriminately issued the certificate regarding export of M/s. Elit without verifying support documents nor making sure that the documents purported shown to him were of M/s. Elit without verifying supporting documents nor making sure that the documents purportedly shown to him were of M/s. Elit.

+ M/s. Elit was able to obtain advance authorisations without furnishing the bank guarantee, under which the impugned goods were imported and subsequently diverted in local market.

+ Thus, I find that Shri Mulraj Gala, by his acts of omission and commission, directly or indirectly aided and abetted M/s. Elit in contravening the provisions of the above referred notification which rendered the impugned goods liable to confiscation under Section 111(o) of the Customs Act, 1962. I find that Shri Mulraj Gala is, therefore, liable to penalty under Section 112 (a) of the Customs Act, 1962.

Holding that the offence committed by the appellant is clearly established from the above findings, the Bench held that there is no infirmity in the orders passed by the lower authorities in imposing and upholding the penalty on the appellant.

The appeal was dismissed.

(See 2015-TIOL-33-CESTAT-MUM)