Legal principle

Consistent miscoding of export scheme codes and use of parallel invoices across numerous consignments amounts to wilful suppression within Section 28(4) — not a bonafide clerical mistake — and a DRI clean chit cannot preclude the Customs Department, whose exclusive domain covers exemption, duty recovery and penalties, from enforcing notification conditions and upholding pre-deposit conditions.

Court decision

The Madras High Court dismissed all three civil miscellaneous appeals as devoid of merits, upholding the Tribunal's stay orders imposing the pre-deposit of Rs.10 crores on the firm and Rs.10 lakhs each on the partners and the final orders dismissing the appeals for non-compliance; it held the Tribunal's direction to deposit 50% reasonable, rejected the parity claim, and answered the substantial questions of law against the appellants.

Facts

M/s A.P.P. Enterprises, a Delhi partnership firm (partners Vinod Agarwal and Dwaraka Prasad Parekh), imported areca/betel nuts from M/s P.T. Ganpathi Trading, Indonesia, for job-work conversion into betel nut tannin and re-export, claiming duty-free treatment under Notification No.32/97 dated 01.04.1997. On information that the goods were diverted to pan masala/gutka manufacturers near New Delhi without reaching the Yamuna Nagar factory, SIIB Chennai investigated 144 bills of entry (assessable value Rs.19.80 crores) and found miscoded shipping bills (export scheme code 99 'NFEI' instead of code 20), parallel invoices with identical serial numbers, and seized sale invoices showing duty-free goods sold locally. A show cause notice dated 20.03.2008 led to Order-in-Original No.9652/2009 denying the exemption, recovering duty of Rs.20,12,62,829 with interest under the proviso to Section 28 read with Section 28AB, ordering confiscation under Section 111(o) read with Section 11 of the FTDR Act with a Rs.3 crore redemption fine under Section 125, imposing a mandatory penalty of Rs.20,12,62,829 on the firm under Section 114A and Rs.50 lakhs each on the partners under Section 112(a). The CESTAT, by stay orders 203-205/2012 dated 07.03.2012, directed pre-deposit of Rs.10 crores by the firm and Rs.10 lakhs each by the partners, and later dismissed the appeals for non-compliance; the importers challenged this before the High Court under Section 130.

Key provisions

• Section 130, Customs Act, 1962 —  Appeal to High Court
• Section 114A, Customs Act, 1962 — Penalty for short-levy or non-levy of duty in certain cases
• Section 129E, Customs Act, 1962 — Deposit of certain percentage of duty demanded or penalty imposed before filing appeal
• Section 111(o), Customs Act, 1962 — Confiscation of improperly imported goods etc
• Section 11, The Foreign Trade (Development and Regulation) Act, 1992 — Contravention of provisions of this Act, rules, orders and foreign trade policy.
• Section 125, Customs Act, 1962 — Option to pay fine in lieu of confiscation
• Section 50(2), Customs Act, 1962 — Entry of goods for exportation
• Section 112(a), Customs Act, 1962 — Penalty for improper importation of goods