Pranav B Prem

In a significant ruling, the Ahmedabad Bench of the Customs, Excise, and Service Tax Appellate Tribunal (CESTAT) has quashed the penalty imposed on M/s. Snehraj Notebook Industries, a small-time printer, in connection with an alleged export scheme violation. The Bench comprising Judicial Member R. Muralidhar and Technical Member Satendra Vikram Singh held that the appellant, M/s. Snehraj Notebook Industries, was merely a small-time printer operating under the Small Scale Industries (SSI) exemption. The tribunal found no evidence to establish that the appellant had abetted any violation of the Export Promotion Capital Goods (EPCG) scheme by M/s. Print Zone.

Background of the Case

M/s. Snehraj Notebook Industries, engaged in the manufacture of "Exercise Note Books," supplied these goods to M/s. Print Zone on payment of the applicable central excise duty. The department alleged that M/s. Print Zone, having imported capital goods under the EPCG scheme, was using the goods procured from M/s. Snehraj Notebook Industries to fulfill export obligations. Since the appellant was not declared as a supporting manufacturer in the EPCG license, the department claimed that the appellant abetted in the contravention of Section 113(i) of the Customs Act, 1962. Following the proceedings, the adjudicating authority imposed a penalty of Rs. 2,00,000 under Section 114(iii) and Rs. 1,00,000 under Section 117 of the Customs Act, 1962 on M/s. Snehraj Notebook Industries.

Also Read: NCLAT Rules: Reflection of Genuine Pre-existing Dispute from Correspondences Between Parties Is Sufficient to Reject Application Under Section 9 of the IBC.

Arguments by the Appellant

The appellant contended that they were unaware of whether M/s. Print Zone had misused the EPCG license. Their role was limited to printing and supplying exercise books, which were dispatched directly to a third party after payment of excise duty. The appellant's invoices clearly showed the excise duty payment, excise registration number, and other statutory details, further evidencing compliance. The appellant argued that no concrete evidence existed to establish their involvement in any wrongdoing. The appellant pointed to the excise returns they had filed, which substantiated their claim of legitimate supply. It was emphasized that they had no knowledge of the export scheme or its terms and requested the penalty be set aside.

Department's Stand

The Revenue argued that the actions of the appellant supported the wrongful utilization of the EPCG scheme by M/s. Print Zone. Specifically, the department relied on the statements of Shri Nareshbhai Savjibhai Aghara (Partner of M/s. Print Zone) and Shri Pathik Sheth (Partner of M/s. Snehraj Notebook Industries). The adjudicating authority highlighted that invoices issued by the appellant listed M/s. Print Zone as the consignee but the goods were directly transported to M/s. Rup Exports at Mundra Port.

Referring to Para 40.5 of the adjudication order, the department asserted: "...M/s. Snehraj Notebook Industries issued the Central Excise invoices without declaring the Central Excise Tariff Entry Number and keeping the vital columns for 'date and time of removal of goods' 'truck number' etc. blank. This indicates that M/s. Snehraj Notebook Industries were aware that even though their invoices show that the destination of the goods was the factory of M/s. Print Zone at Morbi, the subject goods were cleared by them directly to Mundra for export... Thus, by issuing incorrect invoices and arranging transport of the goods, M/s. Snehraj Notebook Industries, Ahmedabad have abetted and assisted M/s. Print Zone in fraudulently exporting the goods, which rendered the exported goods liable for confiscation under Section 113 (i) of the Customs Act, 1962."

CESTAT's Observations and Ruling

After considering the submissions and records, the Tribunal found that the appellant was merely a small-time printer operating under the SSI exemption. The Tribunal observed: "As a small-time vendor, he is not expected to know as to under which scheme the export was undertaken by M/s. Print Zone/Rup Exports. His genuinity gets clarified by the fact that they have cleared the goods on payment of Excise Duty and they are also showing the details of such clearance in their monthly ER-1 Returns."

Also Read: “Acts Done Without Approval Under Section 17A Are ‘Null and Void’, Karnataka High Court: ‘Approval is Imperative to Safeguard Against Vexatious Prosecution’”

The Tribunal concluded that the department failed to establish a specific case of abetment against M/s. Snehraj Notebook Industries. Accordingly, the penalties imposed under Section 114(iii) and Section 117 of the Customs Act, 1962 were set aside, and the appeal was allowed.

Appearance

Shri. Ashish Jain & John Christian, Consultant for the Appellant

Shri. Sanjay kumar, Superintendent (AR) for the Respondent

Cause Title: Snehraj Notebook Industries V. Commissioner Of Customs-Ahmedabad 

Case No: Customs Appeal No. 10337 Of 2023

Coram: Hon'ble Mr. R.Muralidhar [Member (Judicial)], Hon'ble Mr. Satendra Vikram Singh [Member (Technical)]

[Read/Download order]