Customs – Re-import of export goods by SEZ unit by mis-declaring country of origin – Bonafide of appellants relevant to determine quantum of fine and penalty – Redemption fine reduced and penalties set aside: CESTAT by Majority
By TIOL News Service
AHMEDABAD, JULY 09, 2009: THE appellants are manufacturers-exporters of ready made garments having their unit in SEZ. Revenue took up investigation of three containers imported by the appellants and found that the goods imported were in fact originally exported by the appellants earlier. However, in the bills of entry, the country of origin was shown as Dubai . In the course of investigation, it was found by the Revenue that the appellants made certain insertion in the bills of entry indicating the reference of original shipment documents pertaining to earlier exports from the unit, after the Customs noting on the said bills of entry. Action was initiated for confiscation of goods and the Commissioner imposed a redemption fine of Rs. 25 lakhs with penalty of Rs. 10 lakh on the company, Rs. 5 lakhs each on the Director and factory manager and Rs. 2.5 lakhs on the CHA. The Commissioner also ordered that the said exports should not be regarded for computation of NFE.
Aggrieved by this order, the appellants, i.e. the company, director and the factory manager (it is not known if CHA has appealed separately or not) are in appeal before the CESTAT over the imposition of redemption fine and penalties. The appellants took a plea that the goods were re-imported by them after the buyer refused to take delivery of the goods due to late shipment. It was submitted that the factory manager was not aware of the transaction correspondence made at the head office of the appellant with the buyer and hence declared the origin of goods as ‘Dubai' based on the commercial invoices issued by the buyer. It was further submitted that there is no malafide and if it is held that the goods are not eligible for import under Notification 137/2000-Cus, they are eligible for benefits in terms of S.No. 3 of Notification No. 94/96-Cus. It was also submitted that in spite of these exports, they have achieved positive NFE. Since the mistake was bonafide, the goods are not liable for confiscation and penalties.
The Departmental Representative countered these arguments by submitting that the appellants have deliberately mentioned the origin of goods as ‘ Dubai ' so that the said imported goods could be re-exported and show the entire transaction as trading activity. It was further submitted that the appellants also received payments for two consignments even after the said goods were returned by the buyers. In terms of Apex Court judgment in Om Prakash Bhatia 2003-TIOL-06-SC-CUS the goods are liable for confiscation for mis-declaration of country of origin and penalties.
Member (Technical) observed that there are definite doubts about the appellants' claims on the transaction with their buyer in Dubai and the department has not conducted proper investigation into this aspect. However, since the origin of goods was mis-declared and but for the investigation, the appellants would have shown these goods as imported, and there being a clear omission on the part of appellants, the goods are liable for confiscation. It was further observed that mens rea is not a criterion for confiscation of goods under Section 111 and imposition of penalty under Section 112 of the Customs Act, 1962. In view of this, the redemption fine and penalties imposed by the Commissioner were upheld.
Member (Judicial) disagreed with the views of Member (Technical). It was observed the appellant had not availed any export benefit at the time of exports which is neither denied nor disputed by Revenue. There is also no dispute on the achievement of positive NFE even without considering this disputed export into account. Since there is plausible explanation that the country of origin was shown as Dubai based on the commercial invoices issued by the buyers and the fact of rejection was not known to the factory, as the entire correspondence was handled by the appellant's head office, benefit of doubt has to be extended to the appellant. In view of this, Member (Judicial) concluded that the redemption fine has to be reduced from Rs. 25 lakhs to Rs. 1 lakh as the goods are technically liable for confiscation.
Due to the difference of opinion, the matter was referred to the Third Member. It was observed that there is no revenue implication in the transaction and in view of the bonafides of the transaction, heavy fine is not warranted. The Third Member therefore, concluded that bonafides of the appellants have to be looked into before determining the quantum of fine and penalty in terms of the Apex Court decision in M/s Akbar Badruddin Jiwani vs. Collector of Customs 2002-TIOL-267-SC-CUS and concurred with the views of the Member (Judicial) in reduction of redemption fine and setting aside the penalties.
(See 2009-TIOL-1032-CESTAT-AHM in 'Customs' )
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