Penalty u/s 114(iii) of Customs Act Could not impose based on Statement Recorded u/s 108 of Customs Act: CESTAT [Read Order]

The New Delhi Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has held that a penalty under section 114(iii) of the Customs Act, 1962, could not be imposed based on a statement recorded under section 108 of the act. It was held that a statement recorded under section 108 of the Customs Act is not valid evidence under section 138B of the Customs Act.

Shanti Swaroop Sharma and Sangeet Tuteja, the Directors of New Era Trading Pvt. Ltd., an exporter of readymade garments, to assail the order dated 27.04.2023 passed by the Principal Commissioner of Customs, ICD (Exports) Tughlakabad, New Delhi , imposing penalties on them under section 114(iii) and section 114AA of the Customs Act, 19622 for the reason that they had connived with Imran Mirza, Proprietor of M/s Concorde Shipping and Logistics India and instead of exporting the goods to countries listed in the Focus Market Scheme, diverted them to Dubai to enable the exporter to avail undue benefits under the said Focus Market Scheme.

It transpires that M/s New Era Trading Pvt Ltd was engaged in the export of readymade garments to UAE, Sudan, Senegal, UK, Afghanistan, Armenia, Azerbaijan, Kazakhstan, Ethiopia, Germany and Myanmar and availed the benefit of drawbacks under the Focus Market Scheme.

However, intelligence was received that New Era Trading fraudulently availed special Focus Market Scheme benefits by deliberately misdeclaring the consignee country for the purpose of obtaining undue benefit under this scheme. Imran Mirza, Proprietor of Concorde Shipping a freight forwarder after receiving the Let Export Orders manually amended the TR-1 and TR-2 copies of the shipping bills to show the country of destination as Dubai and discharge port as Jebel Ali.

The Principal Commissioner of Customs, ICD (Exports) has imposed penalties on the directors under section 114(iii) and section 114AA of the Customs Act, 1962 for the reason that they had connived with Imran Mirza, Proprietor of M/s Concorde Shipping and Logistics India and instead of exporting the goods to countries listed in the Focus Market Scheme, diverted them to Dubai to enable the exporter to avail undue benefits under the said Focus Market Scheme.

The case of the assessee is that the finding recorded by the Principal Commissioner that the Directors of New Era Trading Pvt. Ltd., in connivance with Imran Mirza abetted and indulged in the act of mis-declaring the destination of the goods exported so as to enable the exporter to avail undue benefits under the Focus Market Scheme is based on statements which were not recorded by the Adjudicating Authority in accordance with the procedure prescribed under section 138B of the Customs Act.

The tribunal observed that the confiscation of goods has been set aside by order of date in Customs Appeal filed by New Era Trading Pvt. Ltd. Penalty under section 114(iii) of the Customs Act could not, therefore, have been imposed upon Shanti Swaroop Sharma and Sangeeta Tuteja.

The two member bench of Justice Dilip Gupta (President) and P.V. Subba Rao (Technical Member) observed that the statement of Shanti Swaroop Sharma made under section 108 of the Customs Act would not be relevant. The bench found that Shanti Swaroop Sharma and Sangeeta Tuteja knowingly prepared and gave false or indirect information regarding the country of export destination is not based of any evidence but is based on mere statements recorded under section 108 of the Customs Act. These statements cannot be relied upon.

The bench observed that the penalty imposed upon Shanti Swaroop Sharma and Sangeeta Tuteja under section 114AA of the Customs Act cannot also be sustained.

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