Dummy Shipping bill used Only for Charges Calculation, No evidence of Fraud: CESTAT Sets aside Penalties on CONCOR CFS & Officials [Read Order]

The Allahabad bench of Customs, Excise & Service Tax Appellate Tribunal ( CESTAT ) set aside penalties imposed on generation of a dummy shipping bill finding that it was made for internal calculation of dues and charges and not for any fraud.

The tribunal found that there is no evidence of proving fraud committed by the company or its officials with the dummy bills.

M/s CONCOR CFS, along with its employees filed appeals against the Order passed by the Principal Commissioner of Customs. The authority had imposed multiple penalties on CONCOR under Regulation 12(8) of the Handling of Cargo in Customs Areas Regulations, 2009, and under Sections 114AA, 117 and 158(2) of the Customs Act, 1962. Separate penalties under Section 114AA were also imposed on the two officials.

As per the facts, two export containers which entered CONCOR’s premises in November 2018. The entry permits were generated on 15.11.2018, and the containers were physically gated-in at around 02:40 AM on 16.11.2018.

Later, a customs broker representative approached CONCOR officials claiming the containers were mistakenly brought to CONCOR and were meant to be shifted to another CFS.

The officials asked for customs permission and payment of applicable dues, and since the representative sought calculation of charges, the CONCOR staff generated a dummy export application at 17:52 hours on 16.11.2018 using a dummy shipping bill number “1234567” only for calculation purposes.

As no customs permission was produced, the containers remained in CONCOR and the matter was also informed to the SHED Customs office.

Subsequently, another exporter filed a proper shipping bill for export of goods and the cargo was subjected to examination.

However, based on the dummy export application slip, the SIIB formed a suspicion that goods were gated-in against a fictitious shipping bill and initiated investigation.

Therefore, a show cause notice was issued for confiscation and penalties against multiple parties, including CONCOR and its officials.

Before the appellate tribunal, CONCOR argued that the dummy shipping bill was never used for gate-in or any customs clearance, and was created only to calculate dues.

It was also contended that the adjudicating authority wrongly relied on statements without following the mandatory procedure under Section 138B of the Customs Act, and therefore was inadmissible.

After hearing the matter and going through dummy shipping bills, the tribunal noted that the Department had not disputed the fact that the containers were gated-in at 02:40 AM, whereas the dummy shipping bill and export application were generated later at 17:52 hours on the same day.

Therefore, the finding that the containers were allowed gate-in on the basis of the dummy export application and dummy shipping bill was held to be clearly incorrect and perverse, said the bench.

The Tribunal also observed that the dummy shipping bill number “1234567” was not a system-generated identifier and appeared to be only a placeholder.

“In the present case, there is no evidence on record that the dummy export application or dummy shipping bill were used for any purposes in the transaction of any business under the Act. At any rate, Section 114AA can be invoked only against the fraudulent exports as per the 27th report of the Standing Committee on Finance and the Appellants, not a fraudulent exporter, no penalty under Section 114AA can be imposed on the Appellants” said the bench.

P.K. Choudhary, Judicial member satisfied with the submissions of the assessee. Therefore the order was set aside, as were the penalties.

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