CESTAT Rules Alteration of Bills of Lading After LEO Amounts to Misdeclaration [Read Order]

The Chennai Bench of the Customs, Excise, and Service Tax Appellate Tribunal(CESTAT) held that any alteration to Bills of Lading after the issuance of the Let Export Order (LEO) constitutes misdeclaration under the Customs Act, 1962, attracting penal consequences.

The appellant, M/s Sanco Trans Ltd., is a Customs Broker engaged in handling export consignments at the Inland Container Depot, Salem. Investigations were initiated by the Directorate of Revenue Intelligence (DRI) into several export transactions where duty drawback had been claimed on the basis of shipping documents that were allegedly manipulated after the grant of LEO.

It was found that the shipping bills filed at the time of export mentioned specific foreign destinations, which qualified the exporters for higher rates of duty drawback. However, subsequent investigation revealed that the Bills of Lading were altered after issuance of the LEO and the consignments were ultimately diverted to different destinations. The actual port of discharge was found to be different from what was declared at the time of export.

The DRI alleged that such post-LEO manipulation of Bills of Lading was done deliberately to claim ineligible drawbacks and to circumvent export scrutiny norms. Show cause notices were issued proposing recovery of drawback amounts and imposition of penalties under the Customs Act, 1962.

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The adjudicating authority confirmed the demand and imposed penalties, holding that alteration of shipping documents after export amounted to misdeclaration. Aggrieved by the order, the appellant preferred an appeal before the Tribunal.

Through Advocate, T. Sundaranathan, the appellant contended that Bills of Lading are commercial documents issued by shipping lines and any subsequent amendment therein could not be attributed to the Customs Broker, as once the LEO is granted, the role of the Customs Broker comes to an end and any changes made thereafter are beyond its control.

He argued that mere change in destination mentioned in the Bill of Lading would not amount to misdeclaration under the Customs Act, especially when goods were actually exported. In absence of any evidence showcasing mens rea, or instructed or facilitated the alteration of Bills of Lading, no penalty can be applied.

The Bench comprising Ajayan T.V., Judicial Member and M. Ajit Kumar, Technical Member, ruled that the shipping bill filed before Customs is a statutory document and forms the basis for assessment, grant of LEO, and sanction of duty drawback. Any subsequent alteration of export particulars, including destination or consignee details, directly affects the validity of the declaration made before Customs.

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The Bench clarified that once the LEO is issued, the exporter is bound by the declaration made in the shipping bill, and any post-export alteration of Bills of Lading without informing Customs amounts to misdeclaration under the Customs Act, 1962.

Subsequently, pointed out that the destination of goods is a material parameter for determination of drawback eligibility, and manipulation of such details defeats the purpose of customs control and revenue safeguards. Further, any alteration of shipping documents after clearance cannot be treated as a procedural lapse and must be viewed as a substantive violation.

Accordingly, the CESTAT upheld the finding that manipulation of Bills of Lading after issuance of Let Export Order amounts to misdeclaration and attracts penal consequences under the Customs Act.

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