Passed By Cc vs (Airport)Chennai on 19 January, 2018

Custom, Excise & Service Tax Tribunal

Passed By Cc vs (Airport)Chennai on 19 January, 2018

        

 
CUSTOMS, EXCISE & SERVICE TAX APPELLATE TRIBUNALSOUTH ZONAL BENCH
CHENNAI

S.
No.
Appeal 
Appellant 
Respondent 

Arising out of OIO No.&dt.

1.
C/230/2010
Skylark Cargo Services
CC Chennai (Airport & Cargo)
35/2010 dt. 21.01.2010
passed by CC
(Airport)Chennai

2.
C/233/2010
K. Ranganayaki Alia Preeti Ramesh

-do-

-do-

3.
C/247/2010
V.Devendrudu

-do-

-do-

4.
C/248/2010
K. Sivagnanam

-do-

-do-

5.
C/256/2010
Thambi
T Abraham

-do-

-do-

6.
C/257/2010
S. Pattabiraman

-do-

-do-

7.
C/269/2010
K.R. Narayanan

-do-

-do-

Appearance:

Shri S.Murugappan, Advocate (Sl.No.1)
Shri G. Derrick Sam, Advocate (Sl.No.2,7)
Ms. L. Mythili, Advocate (Sl.No.3)
Shri SivaramanShabnam, Advocate (Sl.No.4)
Shri S. Krishnanandh, Advocate (Sl.No.5)
None for Sl.No.6
For the Appellants

Ms.P.Hemavathy, Commissioner (AR)
Shri K. Veerabhadra Reddy, JC (AR)
For the Respondent

CORAM :

Honble Ms.Sulekha Beevi C.S. Member (Judicial)
Honble Shri Madhu Mohan Damodhar, Member (Technical)

Date of hearing: 27.10.2017
Date of Pronouncement :09.01.2018

FINAL ORDER No.40130-40136/2018

PerBench

All these appeals arise relating to same impugned order, they were heard together and are also being disposed by this common order.

2. The background of all these appeals is that on the basis of intelligence that on misuse of drawback benefit by certain exporters, Customs Officers intercepted on 08.09.2005, two export consignments covered by five shipping bills filed by Poppy Leather & Apparel, Coimbatore and another five filed by R.G. Impex, Mumbai. The goods consigned for export had been declared as Leather shoe upper for adults, with consignee name and address of United Kingdom. On examination of the packages, it was revealed that only 8 out of 64 cartons in case of Poppy Leather & Apparel and 8 out of 63 cartons in case of RG Impex were found to contain shoe uppers and the rest were found to contain only torn/used/soiled shoe uppers. Goods were placed under seizure. On examination by a leather expert, it was reported that the goods are finished and semi-finished new shoe uppers of inferior quality (in respect of 8 grades) and remaining goods were old and used leather shoe uppers of no commercial value. The goods consigned by M/s.Poppy Leather & Apparel was valued at Rs.3,98,800/- instead of declared value of Rs. 91,74,640/- and in respect of RG Impex, the goods were valued at Rs. 3,97,200/- instead of declared value of Rs. 89,69,436/-. Investigations were extended to Custom House Agents and other persons. It appeared that though the country of declaration was declared as UK, the airway bills for these consignments had been executed only upto Dubai. Investigations were extended to past shipments made by the exporters and by the same buyer, M/s. Field Line Trading LLC, Dubai and it appeared that 23 firms floated by one Mr. K. Gunasekhar, 4 companies floated by one Shri K.B.Mahesh Kumar, 19 companies floated by one Shri S. Divakaran, ie., a total of 46 such firms, had made similar exports to the same buyer in Dubai under draw-back scheme. It further appeared that the exports made by these allegedly fictitious 46 firms involved a total FOB value of Rs. 65,89,54,986/-, where
drawback amount of Rs. 5,65,91,523/- had been sanctioned and drawn. A SCN dated 4.3.2006 was issued to M/s. Poppy Leather & Apparel , RG Impex, other 46 fictitious firms who had allegedly made similar imports earlier, CHAs and other persons. In all, 106 noticees were issued with SCN. The SCN, inter alia proposed rejection of the declared value in all the concerned exports and re-determination of FOB value thereof, proposed rejection or demand of the drawback claimed drawn by the concerned exporters in respect of earlier imports along with interest liability, proposed imposition of penalties on other noticees under various provisions of law and confiscation of seized goods in respect of Poppy Leather & Apparel, RG Impex. The process of adjudication has culminated in the impugned order dated 21-01-2010, inter alia confirming the proposals in the SCN and also imposing penalties on noticees under various provisions of law. Out of 105 persons to whom the impugned order has been issued, the appeals have been filed to this forum by M/s. Skylark Cargo Services (C/230/2010) and
Ms. K. Ranganayaki Alias Preeti Ramesh (C/233/2010), Shri V.Devendrudu (C/247/2010), Shri K. Sivagnannam (C/248/2010), Shri Thambi T Abraham (C/256/2010), Shri S. Pattabiraman (C/257/2010) and Shri K.R. Narayanan (C/269/2010). As all these appeals emanate out of the same impugned order, they are taken up together for common disposal.

3. On 27.10.2017, when the matter came up for hearing, the Ld. Advocates representing the appellants made submissions in support of the appeals filed by them. The summary of the submissions made by the concerned Ld. Advocate as the arguments of the authorized representative for the Revenue, in each of these appeals are summarized as under:-

Appeal C/230/2010
3.1 The appeal has been filed by M/s.Skylark Cargo Services against imposition of penalty of Rs.3 lakhs under Section 114 (iii) of Customs Act, 1962. Appellants are a CHA. It has been alleged that appellants were one of the three CHAs whose services were utilized in filing the shipping bills of the fictitious export firms allegedly floated by Shri K. Gunasekhar, S.Divakaran and his associate Shri K. Jayaraman.

3.2. When the matter came up for hearing, Ld. Advocate Shri S. Murugappan takes us to para-82 of the SCN to contend that one Shri S. Balakrishnan who was the permanent employee of K. Gunasekhar had clandestinely obtained ID card from customs as if he is an employee of the CHA of the appellant with the intention to carry out clearance work of export consignment of the export companies floated by their employer of that person. Ld. Advocate submits that said S. Balachandran was employed by them for two years and they have obtained an identity card for bonafide business. He further contends that said Balachandran has forged the signature of authorized signatory of the company. He contends that appellant had no link with Shri Gunasekhar and that they were only victim of the fraud committed by the other persons. There is no abetment on their part and they had no knowledge of nature of the goods. For these reasons, abetment cannot be alleged against them and also provisions of Section 114 of the Act will not be attracted in their case, and hence penalty of Rs. 3 lakhs imposed on them may be set aside.

3.3. On the other hand, on behalf of respondent, the Ld. Commissioner (AR) contends that there is no evidence that any complaint has been made by the appellant for the forgery alleged to have been made by Shri Balachandran. She also takes to paras 72 & 73 of the impugned order where there is narration of statement made by one Shri Divakaran dt.09.09.2005 and 21.10.2005. which clearly shows that the said Shri Balachandran was not their employee but however as requested by Shri Balachandran he got him a “H” card; that as per office records, he had given 310 signed blank documents to Shri Balachandran for filing the shipping bills and that was done with a view to allow him to facilitate customs clearance for the export of Shri Gunasekhar. Ld. A.R also submits that in all, the appellant had handled more than 600 shipping bills for the exports done by Shri Gunasekhar. This being so, there are more than sufficient grounds and reasons to attract provisions of Section 114 (iii), hence the penalty imposed on the appellant is very much justified.

3.4. In response, Ld. Advocate takes us to para-87 of the SCN to contend that signatures affixed in the shipping bills were found to be forged/impersonated, which fact will support the contentions of appellant.

Appeal No.C/233/2010
4.1 This appeal has been filed by appellant Ms. K. Ranganayaki alias Preeti Ramesh, proprietor of M/s.Niqua Imports & Exports against imposition of penalty of Rs.2 lakhs under Section 114 (iii) of the Customs Act. The appellant was represented by Shri G. Derrick Sam, Ld. Advocate. It has been contended that she was only a namesake proprietor and IEC number was obtained by affixing her photograph which was given at the time of seeking employment from
Shri S.Divakaran with whom she had worked earlier; that she was not aware of Divakaran and the persons who had claimed drawback fraudulently by fabricating export documents and that she had not received any drawback amount and was not beneficiary to any of the transactions reflected in the investigation.

4.2 Revenue has countered that appellant had admitted in a statement that she had signed documents for opening bank account and opening of M/s.Niqua Imports & Exports for export business as deposed by K. Jayaraman who is close associate of her employer Shri S. Divakaran; that appellant has wilfully abetted Divakaran in the fraudulent claim of ineligible drawback. Accordingly, penalty imposed on her under Section 114 (iii) of the Act is very much in order.

Appeal No.C/247/2010
5.1 The appeal has been filed by Shri V. Devendrudu, Custom House Agent. against imposition of penalty of Rs.3 lakhs under Section 114 (iii) of Customs Act, 1962. It has been alleged that appellant had handled shipments of the companies floated by Shri K. Gunasekhar in the capacity of a CHA. Ld.Advocate Ms. L. Mythili appeared on behalf of this appellant. It is contended that appellant was not aware of illegal activity in whatsoever manner and did not know anything about export proceeds; that only his employee Shri Balachandran along with
Shri G.Arumugam were attending to export clearance work; that appellant had not signed any of the documents as he was not authorized to do so.

Shri Balachandran had stated that he only had signed all the documents.

5.2 Revenue on the other hand, contends that appellant has admitted that he received all the export documents from one Shri K. Gunasekhar through his employee Shri S. Balachandran; that he only had arranged for obtaining a CHA identity card in his name for Shri S. Balachandran knowing fully that the said person was not his employee. Further, he had also processed and cleared several consignments for the said companies and received his clearing charges through Shri S. Balachandran. It is therefore evident that appellant had fraudulently obtained CHA identity card for Shri Balachandran and abetted in the fraudulent drawback claim of Shri K.Gunasekhar, hence imposition of penalty on the appellant is very much justified.

Appeal No. C/248/2010
6.1 This appeal has been filed by Shri K.Sivagnanam against imposition of penalty of Rs.2 lakhs under Section 114 (iii) of Customs Act, 1962. It has been alleged that appellant K.Sivagnanam is the proprietor of M/s.Tusker Associates. It has been alleged that appellant had signed documents for opening an account in State Bank of Jaipur, Bikaner as instructed by K. Jayaraman and also signed blank cheque books without mentioning any amount.

6.2 The appellant was represented by Shri S. Sivaraman Shabnam,
Ld. Advocate. He submitted that appellant was not involved in fraudulent activities of exports and drawback claim by Shri Divakaran and his associate
Shri Jayaraman; that appellant was innocent and did not even go to the bank to open account but had signed papers shown by Shri K. Jayaraman on the condition that onions were supposed to be exported; that appellant did not also take any money from his bank account as all the money was taken by
Shri K. Jayaraman.

6.3 On the other hand, Revenue contends that it has come to light that appellant had signed the blank cheque books without mentioning any amount, which shows that he was fully aware of the purpose and its consequence. Shri K. Sivagnanam affixed his photograph and signature for the purpose of receiving the drawback amount for improper exports made through this company. The amount of drawback so received has been transferred to the account maintained by him with State Bank of Bikaner and Jaipur from which the amounts have been drawn by him and payments were made to other firms floated by main offenders like S.Divakaran and his associate, Shri K. Jayaraman. Thus it is proved that appellant has abetted Shri S. Divakaran in fraudulent and ineligible claim in respect of the clearances effected in the name of the said firm. Therefore, the appellant is very much liable for penalty under Section 114 (iii) of the Customs Act, 1962.

Appeal No.C/256/2010
7.1 This appeal is filed by Shri Thambi T Abraham, who is a CHA and proprietor of M/s.Fashion Focus against imposition of penalty of
Rs.2 lakhs imposed under Section 114 (iii) ibid. It is alleged that appellant, as instructed by Shri K. Gunasekhar, had signed documents for obtaining IEC number from DGFT and also had signed application and other documents for obtaining bank account at IDBI bank. It is also alleged that appellant had signed blank cheques and had been paid Rs.40,000/- and in this manner had wilfully abetted K.Gunasekhar in the fraudulent claim of ineligible drawback and hence has been penalized Rs.2 lakhs under Section 114 (iii) of the Act.

7.2 The appellant was represented by Shri S. Krishnanandh, Ld. Advocate.

On behalf of the appellant, it has been contended that he is an employee of a regular CHA in Custom House; that he came into contact with K.Gunasekhar through S.Divakaran; that K.Gunasekhar discussed with him for starting a company for exports and subsequently the documents were sent by courier to him for signing the necessary documents for obtaining IEC number and for opening bank account. Appellant has pleaded that he was not aware of the activities of the Gunasekhar; that he had no knowledge of exports made through his company and did not receive any ineligible drawback benefit from the company and that he had only been given Rs.40,000/- by Shri Gunasekhar in two or three instalments.

7.3 Revenue, on the other hand, contends that appellant had knowingly abetted K.Gunasekhar in floating fictitious firms and had opened bank account on his instructions. Appellant cannot claim ignorance of the purpose and extent of his actions, especially when he had signed blank cheque books and handed over the same to K.Gunasekhar. Hence penalty of Rs.2 lakhs under Section 114 (iii) ibid is very much justified.

Appeal No.C/257/2010
8.1 This appeal has been filed by appellant Shri S. Pattabiram, Proprietor of P.R. International against imposition of Rs.2 lakhs under Section 114 (iii) of the Customs Act for abetment of Shri S.Divakaran in fraudulent availment of ineligible drawback. The appellant was not present either in person or through an authorised counsel.

8.2 Revenue contends that appellant had admitted in his statement and also during personal hearing that he had signed the application and other legal documents for opening bank account at Union Bank of India; that he had also signed blank cheque leaves which were used by S.Divakaran for withdrawing fraudulent drawback amount. Thus, appellant has knowingly and wilfully abetted S.Divakaran in the fraudulent claim of ineligible drawback and therefore even if he has not received any drawback amount, the penalty imposed on him is very much justified.

Appeal No.C/269/2010
9.1 This appeal has been filed by Shri K.R.Narayanan against imposition of penalty of Rs.2 lakhs under Section 114 (iii) of the Act. It has been alleged that this appellant had also abetted Shri S. Divakaran. The appellant was represented by Shri G. Derrick Sam, Ld. Advocate. It is contended that appellant had only permitted to float M/s.Heritage Fashion Park in his name but did not know the purpose behind the entire episode; that he gave blank signed cheques to K. Jayaraman who has misused the same for his own purpose; that he was not aware of the exports made by the said firm and did not receive any monetary benefits. He takes us to para 254 at page 167 of the impugned order wherein it is recorded that Shri. K. Jayaraman has admitted that drawback amounts sanctioned to M/s.Heritage Fashion Park has been carried out by Shri K. Jayaraman without the knowledge of Shri K.R. Narayanan.

9.2 Revenue on the other hand contends that appellant had admitted to his interactions of lending his name to float a company and open bank account and giving blank signed cheques to S. Divakaran. He cannot plead ignorance or lack of knowledge of his actions and hence penalty imposed on him is very much justified.

10. Heard both sides and have gone through the facts.

11. In all these cases, the appellants have claimed that they had been taken for a ride by the main protagonists namely Shri K.V. Mahesh Kumar, Shri K. Gunasekhar & Shri S.Divakaran. The have pleaded ignorance of their actions and the consequences that came about therefrom. The CHAs concerned also have contended that they themselves had not signed the shipping bills. However, as seen above, they had either enabled the grant of CHA identity card to the henchmen of the main operators which enabled shipping bills to be filed or facilitated the operators by their fraudulent activity. In respect of the other appellants, notwithstanding their common protestations that they had only lent their name for starting a company, for opening bank accounts giving signed blank cheques etc., it does not appear to reason that all these appellants were babes in the wood. They surely were aware of what was happening. We therefore afraid that their arguments do not cut any ice. Litigants are expected to come with clean hands. This has been the law laid down by the Hon’ble Supreme Court in the case of S.P. Chengalvarya Naidu v. Jagannath (1994) 1 SCC 1as under :

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