CESTAT dismisses Allegation of Export Duty Evasion on Samples sent for Certification as Finished Goods on ground of Lack of Evidence [Read Order]

THE Customs Excise and Service Tax Appellate Tribunal (CESTAT), Chennai dismissed allegation of export duty evasion on samples sent for certification as finished goods on grounds of lack of evidence.

The appeal is filed by the exporter, M/s. Thaya Tanning Company of leather goods to whom a Show Cause Notice dated 13.12.2019 was issued alleging, inter alia, that there was switching of the samples taken to the Central Leather Research Institute (CLRI) for getting favourable certification for the goods as ‘Finished Leather’ and thereby facilitating fraudulent export of ‘Semi-finished Leather’ in the guise of ‘Finished Leather’, to evade payment of export duty and to avail duty drawback, apart from other incentives.

 The Show Cause Notice reveal, that a team of officers from the Special Intelligence and Investigation Branch (SIIB), carried out a surprise check at the Container Freight Station (CFS) on 07.10.2016 where some of the consignments of finished leather meant for export were lying at godown, which was sealed by the said officers and with the help of Custodian and CHA, examined the consignments in the presence of Mahazar witnesses and Customs Broker.

Accordingly, Mahazar dated 14.10.2016 was drawn and that as per the Show Cause Notice, samples were forwarded for testing to the CLRI. The CLRI thereafter certified that the samples did not satisfy the norms and conditions laid down in the Public Notice No. 21/2009-14 dated 01.12.2009 hence the exporter approached the Hon’ble High Court of Judicature at Madras by filing writ petition against the SIIB communication and the Court allowed the export of the impugned consignments subject to certain terms and conditions.

Thereafter, the Revenue proposed confiscation of the goods in question covered under Section 113(i) of the Customs Act, 1962, apart from proposing to demand duty, redemption fine and penalty under Section 114(ii). On adjudication, the Joint Commissioner of Customs, passed the Order wherein, he confirmed the demands raised in the show cause notice and the same was upheld in the impugned Order, against which the present appeal has been filed before this forum.

P Dinesha, Judicial Member held that “The facts coupled with the fact that the Mahazar did not witness drawing of any samples, throws sufficient doubts about the allegation of switching of samples and, in any case, the Revenue has not explained anywhere as to the source of the sample which was sent to the CLRI for testing/report. Hence, the demand of confiscation apart from demand of duty liability and the various penalties levied on the appellants cannot sustain, since the very basis on which the case of the Revenue rests is not well founded.”

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