By TIOL News Service

MUMBAI, APR 30, 2014. A case of smuggling of red sanders was investigated by the Customs authorities and a container No. BAXU 5021903 was inspected and examined and the examination revealed that the said consignment consisted of 25.260 MTs of red sander wood logs under the guise of synthetic filament yarn. The container security seal No. 623007 C.Ex, Kalyan was found to have been manufactured by M/s. Warner Industries.

The proprietor of the said M/s Warner Industries in his statement admitted that the said seal was manufactured by them and issued to Shri Sameer Gohil of Central Express Cargo Movers. However, on verification, the said firm was found to be non-existent at the address mentioned in the documents and, therefore, it was alleged in the notice that the appellant had aided and abetted the smuggling of red sander wood logs.

Accordingly a SCN was issued to the said M/s. Warner Industries proposing to impose penalty u/s 114 of the Customs Act, 1962 for having rendered the export goods liable to confiscation under Section 112 ibid.

The Commissioner of Customs (Export), JNCH, NhavaSheva, adjudicated the case and imposed a penalty of Rs.1 Crore on M/s Warner Industries.

Against this penalty imposition, the firm is before the CESTAT

It is submitted -

++ They are in the business of manufacturing security seals and supplying the same to various customers including government departments. They had manufactured the seals and supplied the same to M/s. Central Express Cargo Movers and they had also issued a tax invoice for the sale of the said seals. They had undertaken the transaction bonafidely and had also reflected the same in their books of accounts.

++ In the present case, since order was received from Central Express Cargo Movers requesting to emboss/imprint ‘C.EX. Kalyan' etc. they had executed the order accordingly. They had no knowledge that the security seals issued by them would be misused in sealing containers which would be used for smuggling out red sander wood logs. Even in the statement recorded by the investigating authorities, they have clearly stated that they had no knowledge of the transaction.

++ In the absence of any knowledge of the transaction and in view of the fact that they were not even remotely connected with the export of the impugned goods, they have not committed any act warranting imposition of any penalty.

++ Reliance is inter alia placed on the Tribunal decision in Maheshwari Rocks (I) Pvt. Ltd. [2010-TIOL-165-CESTAT-MAD] in support.

The Revenue representative adverted to the order of the Commissioner and submitted that there was no firm in the name of ‘Central Express Cargo Movers' existing and the appellant had not verified the genuineness of the said firm and on account of this omission on their part to verify the existence of the buyer of seal, the appellant abetted in the attempt to smuggle out red sander wood logs which were liable to confiscation. And as such the penalty imposed is proper.

The Bench observed -

"5.1 The only charge against the appellant is that the appellant manufactured seals bearing certain serial numbers and embossed with the words ‘C.Ex. KALYAN' and so on and the buyer of the said seals were found to be non-existent. In the statement, the appellant has admitted that he had received order for security seals over fax and these seals were collected by the buyer in person and the payment was made in cash. The appellant had reflected the transactions in the books of accounts and also paid VAT on the sale of such security seals. In view of the above there is no intention on the part of the appellant to abet or aid smuggling of any goods for export, let alone red sander wood logs. The appellant was no way concerned with the export of the said goods except that the seals manufactured by him were used for sealing the export containers."

After referring to the case laws cited by the appellant the CESTAT further observed -

"…In the present case except for the fact that the appellant sold the security seals to a non-existent firm, there is nothing on record showing that the appellant had any knowledge that the security seals manufactured and sold by him would be misused for sealing containers in which red sanders would be stuffed. Therefore, in the absence of a prima facie evidence against the appellant, we are of the view that the appellant has made out a strong case for wavier of penalty imposed on him."

In fine, the Bench granted unconditional waiver from pre-deposit of the penalty adjudged against the appellant of Rs.1 Crore and stayed the recovery.

(See 2014-TIOL-668-CESTAT-MUM)