Importer penalized for forged phytosanitary certificates, goods ordered for re-export in kiwi fruit import case.

Case Name:

Ram Prasath Vs Commissioner of Customs (CESTAT Chennai)

Key Takeways:

- The case highlights the importance of submitting genuine and accurate documents for customs clearance.

- Forging and manipulating import documents can lead to severe penalties and confiscation of goods.

- The court ordered the re-export of the goods and imposed penalties on the importer for the violations.

Issue:

Whether the importer should be penalized for submitting forged phytosanitary certificates and the goods should be confiscated or allowed for re-export.

Facts:

- M/s. Ram Traders filed four bills of entry for importing kiwi fruits claimed to be of Chilean origin.

- An alert was received that the origin might be Iran, whose import was suspended.

- Examination revealed Iranian markings on crates and fumigation markings on pallets.

- The phytosanitary certificates submitted were found to be forged and manipulated.

- The goods were purchased on a high sea sale basis from a Dubai-based company.

- The values of the goods were enhanced during assessment due to undervaluation.

- The Plant Protection Officer ordered the goods to be re-exported within 15 days.

Arguments:

Importer’s Arguments:

Claimed unawareness of the forgery as the goods were purchased on a high sea sale basis.

Argued for setting aside the redemption fine and penalties due to the perishable nature of the goods and incurred demurrage charges.

Relied on a previous Tribunal decision where redemption fines and penalties were set aside when goods were ordered for re-export.

Department’s Arguments:

Highlighted the details of forgery and manipulation in the phytosanitary certificates.

Argued that the importer is responsible for verifying the documents before submission.

Contended that the reduced redemption fine and penalties by the Commissioner (Appeals) were justified.

Key Legal Precedents:

Goyal Trading Co. & Others Vs CC Nhava Sheva –

Final Order No.86357-86362/2023 dt.6.9.2023 (cited by the importer’s counsel)

Judgement:

The Tribunal upheld the order for re-export of the goods.

The redemption fine of Rs.5 lakhs was set aside as the goods were ordered for re-export.

The penalty under Section 112(a) was reduced from Rs. 5 lakhs to Rs. 4 lakhs.

The penalty under Section 114AA was reduced from Rs. 10 lakhs to Rs. 8 lakhs.

The Tribunal considered the perishable nature of the goods, incurred demurrage charges, and the fact that the goods were ordered for re-export while reducing the penalties.

FAQs:

Q1. What was the main issue in the case?

A1. The main issue was the submission of forged and manipulated phytosanitary certificates by the importer for the import of kiwi fruits, leading to penalties and confiscation of goods.

Q2. Why were the goods ordered for re-export?

A2. The goods were ordered for re-export because the phytosanitary certificates were found to be forged, and the goods were suspected to be of Iranian origin, whose import was suspended.

Q3. What was the reasoning behind reducing the penalties?

A3. The Tribunal reduced the penalties considering the perishable nature of the goods, the incurred demurrage charges, and the fact that the goods were ordered for re-export.

Q4. What is the significance of this case?

A4. This case highlights the importance of submitting genuine and accurate documents for customs clearance and the consequences of forging or manipulating import documents, which can lead to severe penalties and confiscation of goods.

Q5. What is the key takeaway for importers?

A5. Importers must exercise due diligence in verifying the authenticity and accuracy of all documents submitted for customs clearance, as they are responsible for the consequences of submitting forged or manipulated documents.

Brief facts are that the appellant filed four Bills of Entry dt. 24.11.2022 and 03.12.2022 at M/s.Kern ICD, Madurai for the import of Kiwi Fruits which was stated to be of Chile Origin. An alert from NCTC, Mumbai was received in respect of Bill of Entry No.3457434 dt. 24.11.2022 informing that the origin of the said Kiwi fruits might be of Iran and the import of Kiwis from Iran has been suspended w.e.f November 2021 as per the Agriculture Ministry’s Order No.18/23-2015-PP II (e-16587) dated 07.12.2021. Further, it appeared that the goods were undervalued. Hence thorough examination of the documents and the goods were ordered to be carried out in respect of all the Bills of Entry filed by the importer.

2. On examination of the containers, it was found that the 86 crates of Kiwi fruits were having Iranian markings on the plastic material covering the crates and 7 wooden pallets used for packing of the said kiwis were having Iranian fumigation markings. On further examination of the records and documents submitted by the importer, it was seen that the importer had purchased said cargo on High Sea sale basis from M/s. Ochelle International LLP, Chennai, who had in turn imported the same from M/s. Ochelle General Trading LLC, Dubai. It appeared that the copy of Chile Phytosanitary Certificate dt. 31.05.2022 submitted by the importer has been forged and manipulated by editing and adding extra information in the space for additional declaration in the certificate, the details of which are not present in original certificate.

3. On examination of the cargo in respect of the other three Bills of Entry dt. 03.12.2022 also, it was found that the Phytosanitary certificates in respect of all the cargo in 8 containers under the above three Bills of Entry have been forged and manipulated. The original 5 certificates downloaded from the official website of Chile Government showed that these certificates were issued to importers from different countries such as USA,

China, Brazil, France, Costa Rica and for different fruits such as Apples and Grapes.

4. As it appeared that the imported goods were undervalued, the values of same were enhanced during the assessment of bills of entry.

5. The Plant Protection Officer, Madurai after verifying the imported goods had given an order to the importer on 23.12.2002 to the effect that the consignments should be deported within 15 days for the reason that all the details in the Phyto Sanitary certificates are forged. The appellant also requested for re-export of the cargo vide letter dt. 06.01.2023 and waived the issuance of the show cause notice.

6. After due process of law, the original authority vide order dt. 13.1.2023 ordered for confiscation of imported goods, “Kiwi Fruits” totally valued at Rs.1,21,15,314/- under Section 111 (d) of Customs Act, 1962 and also ordered for re-export of the said goods on payment of redemption fine of Rs.20,00,000/- . A penalty of Rs.10 lakhs was imposed on Shri Ram Prasath, Proprietor of M/s.Ram Traders ( appellant- importer) under Section 112 (a) of the Customs Act, 1962. A separate penalty of Rs.10 lakhs was imposed under Section 114AA of the Act ibid. On appeal, Commissioner (Appeals) vide order impugned herein reduced the redemption fine to Rs.5 lakhs and also reduced penalty imposed under Section 112 (a) and Section 114AA to Rs. 5 lakhs and Rs.10 lakhs respectively. Aggrieved by such order, the appellant is now before the Tribunal.

7. The learned counsel Sri A.K. Jayaraj appeared and argued for the appellant.

7.1 At the outset, it is argued by the learned counsel that there is much delay in passing the impugned order by the Commissioner (Appeals) and therefore the order itself is non-est. The appeal was filed against the order passed by the adjudicating authority on 03.03.2023. Personal hearing was granted on 22.3.2023. Another opportunity of personal hearing was offered to the appellant on 18.04.2023. Thereafter, the impugned order has been passed with much delay only on 28.06.2023. Ld. counsel submitted that the copy of the impugned order was received by the appellant only on 01.09.2023. The delay in passing the impugned order by the Commissioner (Appeals) has caused much hardship to the appellant as the appellant has been prevented from reexporting the goods at the earliest. The goods have now been completely deteriorated and cannot be sold in the market. Ld. counsel submitted that as the goods have deteriorated and are not in a saleable condition, the imposition of redemption fine is not justified. Ld. counsel adverted to para-9 of the impugned order to argue that it has been noted by the Commissioner (Appeals) that there is no margin of profit as the goods are ordered to be re-exported and as the goods are of perishable nature. It is submitted that the appellant has incurred huge demurrage charges and redemption fine imposed may be set aside.

7.2 With regard to the penalty imposed under Section 112 (a) (i) of Customs Act, 1962 as well as Section 114AA of the Act ibid, learned counsel submitted that the purchase of goods was on high sea sale basis and that they are not the original buyer. It is argued by the learned counsel that appellant was unaware of the nongenuineness of the documents furnished by the supplier. It is submitted that the Commissioner (Appeals) in para-9 of the order has noted that the contention of appellant that they were not aware of the forgery of documents cannot be brushed aside completely, though there is room to doubt the bonafides of the importers.

7.3 The decision of the Tribunal in the case of Goyal Trading Co. & Others Vs CC Nhava Sheva – Final Order No.86357-86362/2023 dt.6.9.2023 was relied by the learned counsel to submit that when the goods are ordered to be re-exported the Tribunal had set aside not only the redemption fine but also the penalty imposed under Section 112 (a) of the Customs Act, 1962. The Ld. Counsel submitted that though there is an allegation of undervaluation, the appellant is not disputing the issue of enhancement of value of goods. It is prayed that the appeal may be allowed.

8. Ld. A.R Shri R. Rajaraman appeared and argued for the Department.

8.1 With regard to the contention put forward by the learned counsel that there is delay in passing the impugned order by Commissioner (Appeals), Ld. A.R submitted that though personal hearing was granted on 22.03.2023 the appellant did not appear for the hearing. Only on 18.04.2023 the appellant appeared and argued the matter. The order has been passed within 2 months after the personal hearing and there is no delay in passing the impugned order. The original authority though ordered for confiscation has given the opportunity to the appellant to reexport the goods which should have been availed by them. The appellant cannot submit that they have incurred huge loss because of delay in passing the impugned order as there is no delay in passing the order.

8.2 Ld. A.R adverted to para 2.2 of the Order-in-Original to bring out the facts with regard to forgery and manipulation made in the Phytosanitary Certificates submitted by the appellant. A Table is provided in the said paragraph which gives the details of the manipulations found in the forged documents submitted by the importer. At Sl.No.1, it is seen that the Phytosanitary certificate of UAE refers to goods of Chile origin. In the said original certificate, additional declaration has been left blank, whereas in the forged Phytosanitary certificate of the same number submitted by the Importer, additional declaration viz., Free from A) AspidiotusNeril

(Aucuba Scale) B) TrialeurodesVaporiorum (Glasshouse Whitefly) etc. have been added. In similar manner, all the 5 certificates have been examined and noted by the adjudicating authority as to the extent of manipulation and forgery committed in the certificates. It is the responsibility of the appellant to verify the documents before submitting the same along with the Bill of Entry. Merely because the goods have been purchased on high sea sale basis, the appellant cannot absolve from the charge and the consequence of

having produced such forged certificates. The Commissioner (Appeals) has sufficiently reduced the redemption fine and penalties. The value of the Kiwi fruit per kg has been quoted as $ 0.3 which appears to be undervalued. The impugned order does not require any interference. Ld.A.R prayed that the appeal may be dismissed.

9. Heard both sides.

10. It has to be stated that there is an issue of enhancement of value of the imported goods. Ld. Counsel for appellant has submitted that they are not contesting the enhancement of value. The Ld.Counsel for appellant has strenuously argued that the impugned order is passed with much delay and is therefore to be considered as non-est in law. As narrated above, after filing the appeal before Commissioner (Appeals) on 3.3.2023, the appellant

was given personal hearing on 22.3.2023. The appellant or the representative failed to appear on such date. Another opportunity was given on 18.4.2023 on which date, the hearing was complete. After hearing, the impugned order is passed on 28.6.2023. It is contended by the appellant counsel that the appellant received the order only on 1.9.2023. Though there may be slight delay in despatch of the order, the same does not tantamount to make the

order non-est or invalid as per law. This issue is held in favour of department and against the appellant.

11. The challenge in the present appeal is confined to redemption fine and the penalties imposed. The Commissioner (Appeals) has reduced the redemption fine from Rs.20 lakhs to Rs.5 lakhs and the penalty imposed under Section 112 (a) from Rs.10 lakhs to Rs.5 lakhs. The penalty imposed under Section 114AA is reduced from Rs.20 lakhs to Rs.10 lakhs. In para-9 of the impugned order the Commissioner (Appeals) has noted that there is no margin of profit as the goods are ordered to be re-exported. Further, it is also to be seen that the appellant has incurred huge loss due to demurrage charges etc. as the goods have been ordered to be reexported. The goods are of perishable nature. Since they are ordered to be re-exported, the redemption fine imposed is without any basis and requires to be set aside. In the decision relied by the learned counsel for appellant (supra) it is held that when the

goods are allowed to be re-exported, no redemption fine is to be imposed. I find that redemption fine of Rs.5 lakhs imposed under Section 125 for redeeming the goods for the purpose of re-export only requires to be set aside. It is made clear that I do not interfere with the direction for re-export of goods.

12. The next issue is with regard to penalty imposed under Section 112 (a) as well as Section 114AA of the Customs Act, 1962.

13. The facts bring out a case of forgery and manipulation of the documents submitted along with the Bills of Entry. It is the responsibility of the importer to furnish correct and genuine documents so as to assist in smooth clearance of the goods by the Customs Department. The system can operate efficiently only on mutual trust of the department as well as the parties.

In the present case, the forgery and manipulation of the document is explicit and details are mentioned in the table in para 2.2. of the OIO. I also note that the Commissioner (Appeals) has observed that though the purchase was made on High Sea sale basis, there is room to doubt the bonafides of the importer. Ld. counsel has argued that they were not aware of the forgery and manipulation done in the documents as the purchase was on high sea sale basis. The same cannot be accepted. However taking into consideration that the goods are being ordered to be re-exported, and also that the appellant has incurred huge demurrage charges, I am of the view that the penalty imposed under Section 112 (a) (i) can be reduced from Rs.5 lakhs to Rs.4,00,000 lakhs (Rupees Four lakhs only). So also, I reduce the penalty imposed under Section 114AA of the Act from Rs.10 lakhs to Rs.8,00,000/- (Rupees eight lakhs only).

14. In the result, the impugned order is modified to the extent of setting aside redemption fine of Rs.5 lakhs without disturbing the order to re-export the goods. The penalty imposed under Section 112 (a) is reduced from Rs.5,00,000/- to Rs.4,00,000/- (Rupees Four lakhs only). Penalty imposed under Section 114AA is reduced from Rs.10,00,000/- to Rs.8,00,000/- (Rupees eight lakhs only).

15. The appeal is partly allowed in the above terms.

(Dictated and pronounced in court)

Sd/

(SULEKHA BEEVI C.S.)

Member (Judicial)