CESTAT Kolkata Sets Aside ₹50 Lakh Penalty Against Individual In Silk Necktie Export Drawback Case

The Kolkata Bench of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT) has set aside two penalties of ₹25 lakh each imposed on an individual accused of assisting in a fraudulent silk necktie export drawback scheme.

It found that the individual had helped the main accused obtain a driving licence illegally in a fake name, which was later used to open a bank account.

However, the bench comprising Judicial Member R. Muralidhar held that while this act was illegal and could expose the individual to criminal proceedings, it alone could not establish his involvement in the alleged overvaluation of export goods or fraudulent duty drawback claims in the absence of corroborative evidence.

The case arose out of an investigation into exports of silk neckties, in which an exporter had claimed duty drawback of over ₹3.57 crore.

The department alleged that the appellant had helped one of the key accused obtain a fake driving licence, which was later used to open a bank account through which drawback amounts were routed.

Based on these allegations, penalties of ₹25 lakh each were imposed under Sections 114(iii) and 114AA of the Customs Act, 1962.

The bench observed that although helping someone obtain a fake driving licence could amount to a separate criminal offence, that fact alone did not establish the appellant's involvement in the alleged overvaluation of exported goods or fraudulent drawback claims.

"the Appellant has helped the mastermind Jassi alias Ashutosh Birla to obtain one fake Driving Licence. In turn, this fake Licence has been used for opening the bank account. While this act of the Appellant is clearly illegal and may also make him liable for criminal proceedings, this fact alone, on its own, cannot prove that the Appellant had played a specific role in the over-valuation and mis-classification of exported goods in respect of the 456 Shipping Bills and Drawback claim thereof," the tribunal ruled.

The tribunal noted that there was no corroborative evidence linking the appellant to the alleged overvaluation of the export consignments. It also found that there was no allegation that he had filed or signed any false declaration, statement or document in connection with the exports.

The bench further held that the penalty under Section 114AA was not sustainable because the appellant had neither filed nor signed any false declaration, statement, or document in relation to the exports.

"The help rendered by him in obtaining the Driving Licence illegally in a fake name, while would be treated as a criminal offence but does not fall under any of the category of the contraventions specified under Section 114AA," the Tribunal observed.

It also rejected the department's request to invoke Section 117 of the Customs Act at the appellate stage, observing that the show cause notice had proposed penalties only under Sections 114 and 114AA.

Accordingly, the bench allowed the appeal, set aside both penalties and granted consequential relief in accordance with law.

For Appellant: Advocate Atika Sumran Ahmed,

For Respondent: Faiz Ahmed, Authorized Representative