ORDER
C.N.B. Nair, Member (T)
1. M/s. Ambassador Industrial Corporation, Ludhiana filed 5 shipping bills, all dated 15-3-99, at Bombay Customs for export of “Steel Balls”. Total FOB value declared was about Rs. 1.2 crores. The shipping bills were under claims for DEPB benefit at the rate of 20% of FOB value. DEPB benefit is subject to the condition that the benefit cannot exceed 50% of the Present Market Value (PMV) of the goods under export. In view of this, the appellant declared the PMV of the export goods at about Rs. 1.3 crores.
2. Upon physical examination of the goods on 8-4-99, the Customs Officers felt that the goods had been highly overvalued/over-invoiced inasmuch as the declared FOB value came to Rs. 2140 per kg. of steel balls which value was several times higher than the value noticed for similar goods. In respect of previous exports, the value was found to vary in the range of Rs. 180 to Rs. 227 per kg. The case was therefore, referred by the Dock Customs Officer to Special Investigation & Intelligence Branch for investigation. The clearing agent of the exporter was summoned and he submitted the exporter’s letter dated 12-4-99 to Assistant Commissioner of Customs, CFS, Mulund mentioning that the appellants’ clerk made a typographical error while indicating the value of export goods. Value was stated as for a dozen steel balls, instead of declaring the rate as per gross. It was explained that this mistake has led to over-statement of the export value by 12 times i.e. the difference between gross and dozen. Shri Indrajeet Singh Pahwa, partner of exporting firm appeared before the Customs Authorities on 9-6-99 and offered the same explanation. In support of his explanation he also stated that the goods had been purchased from Ball Kings, Ludhiana at the rate of Rs. 145 per kg. and produced photocopy of Bill No. 2277, dated 15-2-99.
2. Subsequent to this statement, Customs Authorities issued 8 summons to the exporting firm for further appearances before them. The exporter did not appear. The Customs Authorities also verified the purchase bill presented by the exporter. Ball Kings, Ludhiana denied the sale of the goods. Further, local enquiries carried out by the Customs Authorities indicated that the value of similar ‘Steel Balls’ would be around Rs. 97.5 per kg. Based on such investigation, Customs Authorities issued Show-cause Notice dated 21-8-2001 alleging violation of the provisions of Section 50{2) of the Customs Act, 1962, Rules 11 and 14 of Foreign Trade Regulation Rules 1993 read with Section 11 of Foreign Trade (Development and Regulation) Act, 1992 and Section 11 of the Customs Act, 1962. The Notice proposed confiscation of the goods under Section 113(d) of the Customs Act, 1962 and penalty under Section 114(1) of the Customs Act, 1962. Under the adjudication order dated 26-2-2002 impugned in the present appeals, the Commissioner of Customs (Export Promotion), Mumbai upheld the charges and passed the following order :
(a) Order confiscation of the Steel Balls for export under the S/Bills mentioned at S. No. 1 of the order above to the Union of India and which are still lying in the Docks. However, I allow the exporter to redeem the said goods on payment of redemption fine of Rs. 3 lakhs. (b) A penalty of Rs. 10,00,000/- (Rupees ten lakhs only) is imposed on M/s. Ambassador Industrial Corporation under Section 114 of the Customs Act, 1962. (c) A penalty of Rs. 50,000/- (Rupees fifty thousand only) is also imposed on each of the partners of the said firm namely Shri Indrajeet Singh Pahwa, Ms. Balwinder Kaur and Shri Charanjit Pahwa. (d) It is also ordered that the goods entered for export under the S/Bills mentioned in para 1 above after being redeemed and payment of redemption fine would be taken from port to town. The present appeals are directed against the above order. 3. We have perused the records and heard both sides.
4. The appellant’s contention all along is that over-statement of the value in the export document took place on account of a clerical error. This position was stated within a few days of examination of the goods under the letter dated 12-4-99 of the appellant. It was repeated in the statement dated 9-6-99 by Shri Indrajeet Singh Pahwa partner of the exporting firm. It is their contention that since they had admitted overstatement of the value and had explained it immediately as the Customs raised the objection, and had produced contemporaneous evidence about the purchase of the export goods, the Customs Authorities were not justified in proceeding with the case, as if it was a case of deliberate misdeclaration of value and in taking an inordinate amount of time in adjudicating the case. The appellants have also submitted that the detention of the goods from March 1999 for almost three years has caused them great hardship and loss. It is also contended that the fines and penalties are exorbitant and unjustified in the facts of the case. They have pleaded for the release of the goods and quashing of the penalties.
5. As against this, the submission of the Revenue is that this was a case of deliberate over-invoicing of export goods to avail of disproportionately higher DEPB benefit. Learned DR has pointed out that the “clerical error” explanation offered by the appellant has no basis in facts, inasmuch as the verification of the purchase bills produced by the appellant had shown that the explanation was false. Further, market enquiries had shown that the declared values were excessive. Learned DR also pointed out that the appellant’s submissions regarding delay in adjudication also is not justified inasmuch as by refusing appearance in terms of several summons issued to him, the appellant was himself causing delay. Further the fact that the appellant had entered the particulars regarding value in his own hand-writing in the export declaration showed that misdeclara-tion of value was not the result of clerical error.
6. Overstatement of FOB value and PMV is not in contest at all. The appellant exporter had admitted it. Their grievance is that a simple error has been treated as a deliberate offence and export consignment detained for about 3 years, causing great loss.
7. The appellant’s explanation about the cause of misdeclaration of value does not carry conviction. The FOB value declared was 12 times more than the actual value. The same is the case of PMV. The explanation is that unit price was taken wrongly by the appellant’s clerk, as for dozen, while, actually it was for gross; prima facie, a plausible cause. But this fails to explain how PMV was declared proportionately higher. Also does not explain why the error did not manifest itself to the appellant himself, since purchase price of the goods was known to the appellant and that was only at the rate of Rs. 145 per kg. In these circumstances, the Commissioner was right in upholding the charge of misdeclaration of both FOB value and PMV, rendering the goods liable to confiscation and appellants to penalty.
8. The appellant’s grievance about inordinate delay in finalising the case is entirely justified. The objection about the declared value was raised on 8-4-99, when the goods were examined. Appellant admitted the overvaluation and offered an explanation. Appellant’s explanatory letter dated 12-4-99 was presented to the Customs on 3-5-99 by his clearing agent. The position was also reiterated in a statement made by the appellant on 9-6-99. The previous export prices also showed that once reduced by a factor of 12, the declared values conformed to the normal value of the goods. Thus, the objection about misdeclaration of value remained established and admitted within less than two months of it being raised. There was nothing much required to be investigated thereafter, to determine the issue of misdeclaration of value. However, the case prolonged for a period of about 3 years and the goods remained detained in the Port all along. Even today, the goods are lying in the Port. Detention of the export goods was totally unnecessary after the appellant had admitted to overstating of FOB value & PMV. The non-release of the goods for such a long period served no purpose, except to cause loss to the appellant exporter. Such an action is also against the provisions of Section 110 of the Customs Act. Sub-rule (2) of that Section specifically provides that “where any goods are seized under Sub-section (1) and no notice in respect thereof is given under Clause (a) of Section 124 within six months of the seizure of the goods, the goods shall be returned to the person from whose possession they were seized.” If six months limit is prescribed by law for issue of Show-cause Notice in respect of seized goods, the time available cannot be longer in respect of goods under investigation.
9. The same is the position about redemption fine and penalties. That the fines and penalties are too harsh and were not justified in law is clear from the fact that each of the partners of the appellant’s exporting firm have been subjected to penalty without any evidence that each of them had played a role in an attempt to defraud the Government by misdeclaring the export value and present market value, so as to claim higher DEPB benefit. The order has justified the imposition of penalties on each of the partners by observing as under:
“The benefit was to come to the firm and each of the partners of the exporting firm was the beneficiary of such deliberate attempt for claiming inadmissible and irregular DEPB benefit. In view of this it is held that each one of the partners along with the exporting firm have become liable to personal penalty.”
It is well settled that beneficiaries to be a firm’s profit do not become liable for every irregularity committed by the firm. In fact, law specifically permits admission of persons to benefits from the profits of a firm without casting any liability to penalty. Penalty follows guilt and not profit.
10. In view of what has been stated above, confiscation of the goods and imposition of penalty on the exporting firm M/s. Ambassador Industrial Corporation, Ludhiana are upheld. However, taking into account the attenuating circumstances, penalty is reduced to Rs. 2,00,000/- (Rupees two lakhs) and redemption fine to Rs. 1,00,000/- (Rupees one lakh). Penalties imposed on the other appellants are vacated.
11. All the appeals are disposed of in the above terms.