Legal principle

Where SEIS scrips are obtained by wilful mis-declaration of the nature of services and are cancelled void ab initio, duty is recoverable under Section 28AAA with confiscation under Section 111(m)/(o) and penalties under Sections 112(a), 114AB and 114AA, an unretracted Section 108 statement followed by voluntary payment can be acted upon without examination-in-chief absent shown prejudice, yet an employee who acted under the company's dictates may be relieved of personal penalty once the company is penalised.

Court decision

The Tribunal dismissed the company's appeal (Customs Appeal No.50201/2024), upholding the duty demand of Rs.2,05,06,646 under Section 28AAA, the confiscation under Sections 111(m) and 111(o), and penalties of Rs.15,00,000 under Section 114AB, Rs.5,00,000 under Section 114AA and Rs.5,00,000 under Section 112(a). However, it allowed the CFO's appeal (Customs Appeal No.50059/2024) and set aside the penalties imposed on Shri Rajesh Shetty under Sections 112(a) and 114AA.

Facts

MetricStream Infotech India Pvt Ltd, a wholly owned subsidiary of MetricStream Inc., USA, rendered IT/IT-enabled services to its parent under a Master Service Agreement but declared the exports as 'Marketing Support Services' (Management Consulting Services, CPC 86503) in its SEIS application and obtained three SEIS duty credit scrips. The scrips were transferred through M/s FTS India Pvt Ltd to M/s MMTC PAMP India Pvt Ltd, which used them to pay duties on its imports during 2015-16 to 2017-18. After DRI investigation, during which CFO Rajesh Shetty's statement was recorded under Section 108 and duty of Rs.2,05,06,646 was voluntarily paid with interest, DGFT cancelled the three scrips as void ab initio. DRI then issued a show cause notice under Section 28AAA demanding the duty with interest, proposing confiscation under Sections 111(m) and 111(o) and penalties under Sections 112(a), 114AB and 114AA, and the Principal Commissioner confirmed the demand, upheld confiscation (without redemption fine as goods were unavailable) and imposed penalties on both the company and the CFO.

Key provisions

• Section 28AAA, Customs Act, 1962 — Recovery of duties in certain cases