Section 114 AA Customs Act Applicable Only For Dummy Exports Made Only On Paper, Not Actual Export Of Goods: CESTAT

Section 114AA of the Customs Act, 1962, penalizes the use of false or incorrect declarations, statements, or documents in any transaction related to customs business. Specifically, it applies to individuals who knowingly or intentionally make, sign, use, or cause to be made, signed, or used such false documents.

S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) stated that it has been made clear that the imposition of enhanced penalty under Section 114AA of Customs Act is applicable only for serious frauds being committed in cases where no goods are being exported, but only papers are being created for availing the number of benefits under various export promotion schemes.

The assessee/appellant is the sole proprietor of M/s Rishay International which was involved in export of Ready-Made Garments (RMG) and fabrics to African countries, mostly to Nigeria, and they had availed customs duty drawback benefits in respect of such exports allegedly in an irregular manner by gross over-valuation of export goods.

Earlier, Directorate of Revenue Intelligence, Mumbai Zonal Unit (DRI) had received specific intelligence indicating that certain exporters were engaged in bogus exports by preparing manual shipping bills (S/Bs), on which actually no export was affected.

The customs authorities had issued Show Cause Notice proposing for recovery of drawback availed irregularly under Rule 16 of the Customs, Central Excise Duties & Service Tax Drawback Rules, 1995, where no Bank Realisation Certificates (BRCs) have been received towards sale proceeds of export goods.

The export goods were confiscated under sub-sections (d), (i), (ia) of Section 113 of the Customs Act, 1962; and penalty was imposed on the assessee and under Section 114(i)/114(iii), 114AA.

The revenue submitted that since the intelligence was received about the assessee obtaining bogus purchase invoices, buying inferior quality readymade garments from the local market and exporting the same at inflated prices, in order to avail inadmissible drawback, and in the absence of realisation of full sale proceeds of export goods, the order is sustainable.

The bench stated that “during the examination of the Section 114AA ibid by the Standing Committee on Finance on the representatives of trade expressing that the proposed provisions were very harsh, which might lead to harassment of industries, by way of summoning an exporter/importer to give a 'false statement' etc., it was explained by the Ministry of Finance that new Section 114AA ibid has been proposed consequent to the detection of several cases of fraudulent exports, where the exports were shown only on paper and no goods crossed the Indian border.”

The bench opined that in this case where in all the shipments goods have been exported, is entirely different from the case of paper exports without actual export of goods, and therefore the provisions of Section 114AA ibid does not apply to the case of the appellant-exporter.

The export goods have actually been exported, as neither there was any dummy export being made only on paper, nor there was any criminal intent involving evasion of duty. Hence, imposition of penalty under Section 114AA ibid does not arise in the case of the assessee, added the bench.

In view of the above, the Tribunal allowed the appeal.

Case Title: Riyaz Sayed Abdul Aziz v. Commissioner of Customs (Export)

Case Number: CUSTOMS APPEAL No. 85411 of 2024

Counsel for Appellant/ Assessee: N.D. George

Counsel for Respondent/ Department: Ram Kumar

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