Judgment:
1. For hearing their appeal, M/s. Discware Private Limited (formerly known as Cyber Express Pvt. Ltd.) are required to pre-deposit a sum of Rs.1,00,00,000/- (Rupees One Crore only) imposed on them by way of penalty under Section 114 (1) of the Customs Act, 1962 (hereinafter referred to as the 'Act'). The allegations levelled against the appellants concerned fraudulently over invoicing the 205000 Compact Disc (CD) Roms for availing inadmissible higher credit under the Duty Entitlement Pass Book (DEPB) Scheme, in violation of the provisions of Section 18 (1) (a) of the Foreign Exchange Regulations Act, 1973, read with Section 11 of the Act, Section 11 of the Foreign Trade (Development & Regulation) Act, 1992 and Rule 11 of the Foreign Trade (Regulation) Rules, 1993. Among other allegations, it was alleged in the show cause notice dated 2.11.99 that some of the items entered for export were unsalable for non-technical fault of CD themselves, and in some cases, the goods in question were sub-standard/pirated softwares of little commercial value, traded in violation of the copyrights law.
The adjudicating authority after discussing the defence of the appellants came to a finding that the transaction was not genuine. He noted that the buyers and the consignees did not have identifiable business and location, and concluded that the deal was "mysteriously ungenuine". For earlier consignments, he noted that there was sufficient evidence to conclude that neither the transactions were genuine nor the disclosed value was correct and obviously, one of the motives behind mis-declaration of value was to avail DEPB amount in an un-lawful manner in excess of that, which was actually admissible. The Commissioner of Customs, the adjudicating authority levied a redemption fine of Rs.50,00,000/- and a penalty of Rs.1,00,00,000/- on the noticee company.
2. Stay application was heard on 20.04.2001 when Shri Bhaskar Sen, Sr.
Advocate submitted that the applicants had imported originals and had made copies therefrom for export. They had declared export value of Rs.750 per CD Rom. The number of CD Roms entered for export was Rs.2,05,000/-. He submitted that there was no excess pricing and no over-invoicing and that in software technology, cost could not be the basis for valuation. There are hidden costs, which have to be taken into account. For earlier consignments foreign exchange had been received. He pleaded that the legal provisions have not been correctly applied. Their replies have not been duly considered. The goods were with the Customs. The financial hardship was also pleaded. He referred to the following decisions:- (1) COLLECTOR OF CUSTOMS, CALCUTTA Vs. LEXUS EXPORTS PVT. LTD. - 1994 (69) ELT 228 (CALCUTTA).
(2) SHILPI EXPORTS VS. COLLECTOR OF CUSTOMS, CALCUTTA - 1996 (83) ELT 302 (TRIBUNAL).
In reply, Shri Mewa Singh, SDR submitted that it was a clear case of over-valuation with malafide intention for getting extra export benefits. The transactions were not genuine and malafide intention was obvious, and referred to the discussion at page 20 of the impugned order-in-original. He submitted that it has been held by the Tribunal's Larger Bench decision in the case of OM PRAKASH BHATIA VS. COLLECTOR OF CUSTOMS, DELHI - FINAL ORDER NO.952/2000 A dated 1.12.2000 that the export value has to be a correct value and that over-invoicing of the goods for exportation was an offence under the Act.
3. We have carefully considered the matter. Serious charges regarding fraudulent availment of export promotion benefits had been levelled against the appellants in these proceedings. Serious irregularities in the repatriation of foreign exchange in respect of the exports already made were detected. In para-13 of the show cause notice, it was alleged that the whole transaction of attempting to export 205000 pieces of CD Roms under the 8 shipping bills mentioned in that notice, was bogus and not bonafide and was with intent to wrongly and fraudulently avail export benefits under the DEPB scheme. The declared FOB value of the consignment was of Rs.15,41,04,062/- while, it was found that a number of CD Roms attempting to be exported contained sub-standard/pirated software of little commercial value.
4. The adjudicating authority had come to a finding that the export transaction in the present case was not genuine; the disclosed value was not correct; buyers and the consignees did not have identifiable business and location; and the conduct of the noticees was contumacious relating to infringement of law to secure undue gains. He held that the motive behind mis-declaration of value was to avail DEPB amount in an un-lawful manner in excess of actual.
5. The appellants have contended that the export price could not be challenged on the basis of costing; the price of Rs.750 per piece was genuine; the foreign buyers were not fictitious; the documents drawn were not fake; earlier consignments have been cleared by their suppliers and the export proceeds have been received. It has also been submitted that the goods in question were in good condition and were saleable.
6. Presently, we are concerned with the disposal of the stay application. However, we note that in their communication dated 11.09.2000 the appellants had conveyed that the buyer was prepare to accept the consignment at reduced price if the shipment could take place by 30.09.2000, and had requested that if the export was allowed even on provisional basis, they would forgo the benefits of DEPB. We also take note of the allegations fact that two items in the CD were un-usable for non-technical fault of CD itself and that in case of some games, it was found that they were sharewares development by people proceeding in USA itself and it appeared that the CD Roms attempted to be exported contained sub-standard/pirated software of little commercial value and were being attempted to be traded in violation of the copy right provisions. (refer page 10 of the show cause notice).
The adjudicating authority had come to a finding as under:- " However, as recorded by me herein above, I find that there is otherwise sufficient evidence to prove that neither the transcations were genuine nor the disclosed value was correct. Obviously, one of the motives behind mis-declaration of value was to avail a DEPB in an un-lawful manner in excess of actual".
However, any further observations on merits may not be appropriate.
Suffice it to say that no case has been made out by the appellants for full waiver of the pre-deposit of penalty amounts.
7. It is seen from the annual accounts of the company for April, 1999 - March, 2000 that the performance during the year ending 31.03.2000 has considerably improved as compared to earlier year.Heading On 31.3.99 on 31.3.2000 (Rs.)Reserve & Surplus 1.87 Crores 40.66 CroresCash & Bank Balance 1.56 Crores 9.96 CroresPrift before 0.05 Crores 0.32 Croresinterest &Tranfer to 0.27 Crores 0.66 CroresGeneral Reserve.
8. On careful consideration of the matter, we direct the appellants to deposit a sum of Rs.25,00,000/- (Rupees Twenty Five Lakhs Only) towards penalty amount within a period of 8 weeks from the date of receipt of this order. On depositing the above sum of Rs.25,00,000/- (Rupees Twenty Five Lakhs) within a period of 8 weeks from the date of receipt of this order, the requirement of pre-deposit of the balance penalty amount will be waived and recovery stayed till the disposal of the appeal. It is made clear that if the above sum of Rs.25,00,000/- is not deposited within the period stipulated above, then the appeal will be liable for dismissal.