2008 (10) TMI 378 - AT - Customs

Fraudulent Drawback and DEPB claims - Assessee mis-declaring the goods being exported in the name of various companies owned/controlled by him the officers of DRI detained and examined export containers declared to contain Gear cutting tools made of high speed steel heat resistant rubber tension tape and Track wheel . These containers had already been cleared by the Customs officers and were on way for shipment - goods actually exported were different from the goods from which the samples had been drawn and this indicated collusion between the Exporter and the Customs officers - SCN issued to the exporters for confiscation of the seized goods disallowing the drawback & DEPB benefit and imposition of penalty under Section 114 of the Customs Act - records were maintained to justify export by making false entries in the Central Excise records like RG-1 register - Raw material purchased from certain firms which were found to be non-existent - consignees were non-existent and fictitious - Held that - goods in question had been grossly misdeclared in terms description quality and value with intention to claim drawback and since their actual value was much less than the amount of drawback claimed no drawback was admissible and the penalty has been rightly imposed. Confiscation of goods exported - Commissioner in the impugned order has observed that since the goods have already been exported the same are not liable for confiscation and accordingly he has not imposed any redemption fine in lieu of confiscation under Section 125 of Customs Act. - Appeal by revenue - Authorization by committee of chief commissioners - held that - It is only in the Finance Act 2008 that a specific provision was made for reference to the Board in case of disagreement between the two Chief Commissioner s of the Committee of Chief Commissioners on the question of legality and proprietary of the Commissioner s order but this provision cannot be given retrospective effect. In view of this the three appeals of the Revenue have to be dismissed as the same are not backed by a valid review authorisation.

Issues Involved:
1. Misdeclaration of exported goods.
2. Admissibility of drawback and DEPB benefits.
3. Imposition of penalties under Section 114 and 117 of the Customs Act.
4. Confiscation of goods under Section 113 of the Customs Act.
5. Imposition of redemption fine under Section 125 of the Customs Act.

Detailed Analysis:

1. Misdeclaration of Exported Goods:
The case involved six companies controlled by Shri Vinod Garg, which were found to have misdeclared the goods being exported to claim fraudulent Drawback and DEPB benefits. The exported goods declared as "Gear cutting tools of cobalt bearing High Speed Steel," "Heat resistant rubber tension tape," and "Track wheels" were found to be substandard items upon examination. The goods were actually cut pieces of bars and rods of mild steel, unvulcanized rubber tape, and unfinished track wheels. The investigation revealed that the firms from which the raw materials were claimed to be purchased were fictitious, and the consignees in the UK were also found to be non-existent.

2. Admissibility of Drawback and DEPB Benefits:
The adjudicating authority disallowed the pending drawback claim of Rs. 1,25,04,440/- and confirmed the demand for wrongly paid drawback amounting to Rs. 3,68,18,331/- along with interest. The Tribunal upheld this decision, concluding that the goods had been grossly misdeclared in terms of description, quality, and value, making them ineligible for any drawback benefits.

3. Imposition of Penalties Under Section 114 and 117 of the Customs Act:
Penalties were imposed on the six companies and their associated individuals under Section 114 of the Customs Act for their involvement in the fraudulent export activities. The Tribunal upheld the penalties, emphasizing that such fraudulent activities warranted deterrent penalties. However, the penal proceedings against the customs officers alleged to have connived with the exporters were dropped due to a lack of evidence.

4. Confiscation of Goods Under Section 113 of the Customs Act:
The Commissioner held the goods liable for confiscation under Section 113(d), 113(i), and 113(ii) of the Customs Act. However, since the goods had already been exported and were not available for confiscation, no redemption fine was imposed. The Tribunal concurred with the Commissioner's findings, affirming that the goods were misdeclared and thus liable for confiscation.

5. Imposition of Redemption Fine Under Section 125 of the Customs Act:
The Revenue filed review appeals challenging the Commissioner's decision not to impose a redemption fine in lieu of confiscation. The Tribunal dismissed these appeals, noting that the review authorization was invalid due to a lack of consensus between the two Chief Commissioners. The Tribunal emphasized that a valid review authorization requires a definite conclusion from the Committee of Chief Commissioners, which was absent in this case.

Conclusion:
The Tribunal upheld the Commissioner's order, confirming the misdeclaration of goods, disallowing drawback claims, and imposing penalties on the appellants. The Revenue's appeals for imposing a redemption fine were dismissed due to an invalid review authorization. The judgment emphasized the seriousness of the fraud and the necessity for deterrent penalties to prevent such fraudulent activities.

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