By TIOL News Service

MUMBAI, DEC 04, 2015: THE appellant are exporters and availing the benefit of Vishesh Krish Upaj Yojana (VKUY). They obtained a VKUY scrip by submitting 296 shipping bills to DGFT. During the verification process, it was found that only 175 of those shipping bills were genuine.

The Jt. DGFT imposed a penalty of Rs. 5.00 lakhs on the appellant. The appeal was rejected; the scrips were cancelled and the appellant paid the penalty imposed.

During investigation,the proprietor of the firm, who was looking after purchase of vegetables, interacting with the DGFT staff, claiming VKUY licence, etc. admitted that he had submitted the export promotion copies of free shipping bills, invoices and copies of bank realization certificates along with the application to DGFT and that on occasions his agent submitted the same on his behalf.

Pursuant to the investigation, a notice was issued to the appellant as to why penalty should not be imposed u/s 114AA of the Customs Act. The Additional Commissioner imposed a penalty of Rs.10 lakhs and in appeal the order was upheld.

Before the CESTAT, the appellant inter alia submitted that they have been severely punished inasmuch as their scrip has been cancelled not only for the purged shipping bills but also in respect of genuine shipping bills. They claimed that they were genuinely entitled to four lakhs worth of scrips but the entire 7.2 lakhs worth of scrip has been cancelled. Moreover, a penalty of Rs.5.00 lakhs was also imposed by DGFT and the same has already been paid.

The Bench noted that the fact that VKUY scrips have been claimed on the basis of purged shipping bills has not been challenged.

After extracting s.114AA of the Customs Act, 1962, the CESTAT observed -

On Merits:

++ The appellants were only beneficiary and were handling their matters directly and personally as admitted by them. They cannot shy away from the responsibility in such circumstances.

++ It can be seen that in cases where movement of goods into and outside the country is involved there are separate sections dealing with the legal provisions. Section 114AA specifically deals with cases where documentation, which is incorrect or false.

++ There may have been cases where documents are made and there is no movement of goods either way and benefits are claimed. Section 114AA is intended to cover those cases.

++ In this respect, the term of "penalty not exceeding five times of the value of the goods" needs to be read as "penalty not exceeding five times of the value of the goods declared in the said declaration or statements or documents".

++ The appellant relies on the case law with reference to the Section 114 is not relevant that insofar as Section 114 deals with violation in respect of actual movement of goods outside the country. Thus for invocation of Section 114 the actual movement of goods is necessary, however for the purpose of Section 114AA movement or existence of goods is not necessary. In view of the above, I am of the opinion that penalty under Section 114AA can be legally imposed in the present circumstances.

Quantum of penalty:

++ On the one hand there was a claim of the appellant that they have not only lost the legally admissible part of the scrip but they have also paid Rs. 5 lakhs as penalty with DGFT. On the other side, the claim of the Revenue is that the case is of deliberate forgery and needs to be dealt with strictly. In view of the fact that the appellant was personally involved in all the activities, the penalty needs to be deterrent.

In fine, the appeal was dismissed.

(See 2015-TIOL-2579-CESTAT-MUM)