Importer Aware of IEC Code Misuse: Delhi HC Upholds ₹83 Lakh Penalty in Customs Duty Evasion [Read Order]

In a recent order, the Delhi High Court found that importers were aware of the Importer Exporter Code (IEC) misuse and upheld a penalty and customs duty demand of Rs. 83 lakh.

The appeal was filed under Section 130 of the Customs Act, 1962, challenging the final order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), which had earlier confirmed two separate Orders-in-Original passed by the customs authorities.

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The case arose from an import transaction on September 18, 2014, when Aromatech, a sole proprietorship of Umesh Kumar, filed Bill of Entry No. 6807339. Upon inspection, the Customs Department discovered that several goods were undeclared or in excess of the declared quantities.

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Further investigation revealed that the appellant had previously filed 15 Bills of Entry claiming customs exemption under Notification No. 12/2012 dated March 17, 2012, without meeting the required conditions. The probe also found that Umesh Kumar had knowingly shared his IEC code and bank details with Rajat Arora, (who conducted import transactions using these credentials). The appellant also failed to file VAT returns, which raised additional red flags regarding the legitimacy of the operations.

A Show Cause Notice was issued on March 25, 2015, to both Umesh Kumar and Rajat Arora, which led to the seizure of goods and initiation of proceedings under Section 28(1) of the Customs Act. Despite attempts by Umesh Kumar to distance himself from the transactions, claiming that he merely lent his IEC and had no knowledge of the operations, the adjudicating authorities found these assertions unconvincing.

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The appellant did not appear for the scheduled cross-examination and alleged forgery of an authorization letter dated September 29, 2014, which was presented by Rajat Arora. These defenses were rejected by the CESTAT, which found both parties acted in concert to willfully evade customs duties.

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The Bench comprising Justice Prathiba M. Singh and Justice Rajneesh Kumar Gupta held that both individuals acted in concert to evade customs duties and could not be viewed separately in their roles. The court found no substantial question of law to justify interference and upheld the findings of the CESTAT, confirming that the penalties and customs duty demands were valid.

The Court explained that the appellant, as the IEC holder, had a duty to ensure it was not misused. The court dismissed the appeal, and all pending applications were also disposed of.

To Read the full text of the Order CLICK HERE

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