CESTAT Quashes Penalty on Diamond Firm Director: No Proof of Misdeclaration or Overvaluation in Exports [Read Order]

Shri Prakash Goti, the appellant, is the Director of Dharmanandan Diamonds Private Limited, a company engaged in importing rough diamonds, polishing them, and exporting the finished product to countries like the USA, Israel, and Belgium.

The Directorate of Revenue Intelligence (DRI) had launched an investigation into two importing companies (Chirayu Impex Private Limited and Amrapali Exim Private Limited), alleging that they misdeclared cut and polished diamonds as broken diamonds to evade customs duty. These companies were also accused of overvaluing the goods to remit excess foreign exchange abroad for unlawful purposes.

During the investigation, some consignments linked to these importers were examined, and the goods were seized. The name of the appellant’s company came up during this process. A company employee stated that a broker had brought diamonds to be exported through Dharmanandan Diamonds. Later, a show cause notice was issued to the appellant proposing the confiscation of goods and imposition of a penalty under Section 114 of the Customs Act.

The adjudicating authority imposed a penalty of Rs. 5,94,096 under Section 114. On appeal, the Commissioner (Appeals) upheld the penalty, following which the appellant approached the CESTAT.

The appellant’s counsel argued that there was no evidence of wrongdoing on their part. He stated that his company’s exports were genuine and had not been confiscated. They also argued that the authorities had failed to specify under which exact provision of Section 114 the penalty was being imposed. It was further argued that there was no intention to evade duty and thus no basis for a penalty.

The revenue counsel supported the penalty, stating that the appellant’s name had surfaced in the investigation related to misdeclaration and overvaluation.

The two-member bench comprising Ashok Jindal (Judicial Member) and K. Anpazhakan (Technical Member) observed that no evidence had been brought on record to show that the appellant was involved in any misdeclaration or overvaluation of exported diamonds. The tribunal observed that the investigation primarily targeted the importing companies, and there was no direct link proving the appellant's involvement in any illegal activity.

The tribunal explained that imposing a penalty without even confiscating the goods is contrary to the legal framework under Section 114. It further observed that the entire case was based on assumptions and that no specific findings had been made against the appellant. The tribunal set aside the penalty and allowed the appeal.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates