How Does SIIB (Export) Work- The Ultimate Guide for Customs Officers (2024)

A comprehensive look into “How does SIIB (x) work” has been among the most requested topics from my small time fans. In fact, everyone knows the importance of this specialty wing of Customs but there is barely a one stop read-through on the subject. So, its quite but natural for gregarious fellows to wish a handy and in-depth write-up as to how the Special Intelligence & Investigation Branch, Export [SIIB (Export)/SIIB (x)] functions.

It goes without saying that SIIB(X) is one such critical branch of the Customs Department without which the offences in the Export would only rise leading huge loss to exchequer and all the way to destabilizing economy in the worst case scenario. The instant post is a humble endeavor to keep the subject matter as elaborate as possible and precise to serve you as a master course on functioning of SIIB(X). Especially, the Customs Officer willing to work for Special Intelligence & Investigation Branch, Export would find it extremely helpful.

[Note: Originally, the Content was meant for publishing as an e-book through NACIN, Mumbai]

Broad Objective of this Course on SIIB(x)

Understanding the objective and purpose of SIIB(X)
Understanding the concepts and working of SIIB(X)
Understanding the legal provisions concerning SIIB(X)
Understanding how to Cause Investigation
Role of Officers working in SIIB(X)
Important Modus Operandi

Table of Contents:Broad Contours of the Guide on SIIB(x)

Chapter 1. Introduction

1.1 Need of SIIB(X)

Chapter 2- Functions of SIIB(X)

2.1 Investigation into fraudulent export

2.2 Gathering of information and intelligence

2.3 Investigation into cases referred by Export Docks

2.4 Acting on receipt of information from across the agencies-

2.5 Examination of Export Goods

2.6 Search, Seizure & Arrest

2.7 Conducting Market Enquiry/Survey

2.8 Placing Alert against the errant exporters

2.9 Modus Operandi Circulars/Alert Circulars

2.10 Holding of Export Benefits such as Drawback etc

2.11 Recommendation for Cancellation of IEC and Customs Broker License

2.12 Verification of genuineness of First Time Exporters

2.13 Preparation of MTR, Replying RTI, CPGRAMS & PQs etc.

2.14 Representing Department before various Appellate Authority and Courts

2.15 Imparting Training to Officers Posted for Examination

2.16 SIIB (X) acts as a Coordinating Agency

2.17 Sponsoring of COFEPOSA Proposal

2.18 Launching of Prosecution in the Court of law

2.19 Processing of Reward

Chapter 3: Legal Provisions

3.1 Provisions under Customs Act, Rules and Regulation

3.2 Relevant Provisions of Allied Acts

3.3 Provisions of Foreign Trade Policy

3.4 Provisions of General Clauses Act, 1897

3.5 Provisions of Limitation Act, 1963

Chapter 4: Causing Investigation in SIIB(X)

4.0 Meaning and purpose

4.1 Gathering of intelligence/information and making of DRI-I

4.2 Detention/withholding of export consignment

4.3 Examination /Seizure of detained goods and seizure report under DRI-II

4.4 Provisional release of seized goods

4.5 Forwarding of Samples for Lab Analysis

4.6 Determination of value of Export Goods

4.7 Recording of statement u/s 108 of Customs Act, 1962

4.8 Address Verification of the exporter’s declared IEC address

4.9 Search under Section 105 of the Customs Act, 1962

4.10 Arrest under Section 104 of the Customs Act, 1962

4.11 Enquiry of CDR

4.12 Enquiry of email id

4.13 Seizure/freezing of bank accounts

4.14 Enquiry of vehicle and seizure

4.15 Enquiry through Bank

4.16 Enquiry through COIN

4.17 Issuance of Show Cause Notice

Chapter 5- Role of Officers

5.1 Role of AC/DC

5.2 Role of Superintendent/Appraising Officer

5.3 Role of Preventive Officer/Examining Officer

5.4 Role of Tax Assistant/STA

5.5 Role of Sepoy/Hawaldar

Chapter 6- Modus Operandi

6.1 Overvaluation of export goods

6.2 Wrong Availment of MEIS

6.2.1 Mis-classification of CTH to avail higher rate of MEIS

6.3 Splitting of S/Bills

6.4- Fabric

6.4.1 Mis-declaration of Drawback heading/ Sr No

6.4.2 Mis-declaration of weight of Fabric

6.5 Cotton Twine Ropes

6.6 Export of Co-axial cable

6.7 Export of Truss Nuts/adjusting Nuts

6.8 Carpet

6.8.1 Mis-declaration of quantity of carpet

6.8.2 Mis-declaration of Machine Made carpets

6.8.3 Over-valuation of carpet

6.8.4 Mis-classification of RITC/DBK Sr no Polyproplyne Mat/Floor Covering

7. Garments

7.1 Mis-declaration of quantity

7.2 Mis-declaration of babies garments as girls dress/Ladies Dresss

7.3 Mis-declaration of garments without jacket or suit

7.4 Mis-declaration of Ladies Dress/Ensembles

7.5 Scarves

8.Mis-classification of DBK heading 940401

9. Brass Items

10. Wrong classification of Hair Pin/Curling Pins/Curling grip

11. Stainless Steel

12. Chemicals

13. Leather Items

14. SCOMET

15.Violations of Condition of EPCG

16.Red Sanders

16.1 Forged Documenst

16.2 Replacement of Cargo

16.3 Mis-use of IEC / CHA Code of genuine exporter / CHA

17 Misuse of AIR/Brand rate

18.Fraud under GST

18.1 Availment of benefits at higher rate by overvaluing the goods

18.2 Misuse of system based processing of IGST Refund

18.3 Supply of same goods twice

19. Project Export

20. Illegal Export of Buffalo Meat

21. Illegal Export of Peaco*ck Tail Feather

Chapter 1: Introduction toSpecial Intelligence & Investigation Branch, Export [SIIB (x)]

1.Need of SIIB(X)

Export of goods is vital for economy as it brings foreign exchange into the country which helps in growth and development of country. It afford opportunity to small and medium industries by searching new markets and expanding business so that production of goods and sales can be increased. As an accepted principle genuine and scrupulous exporters are required to be encouraged and promoted. Hence in view of general policy frame work exports are expected to be free flowing and any detention/hold up of consignments on frivolous ground is unwarranted. Export is so much significant that it is encouraged by the Government and incentives by the way of exemption /remission schemes such DEEC, DFIA, EPCG, drawback, Service Exports from India Scheme (SEIS), Merchandise Exports from India Scheme (MEIS) etc are given to the exporter for export of goods.

At one hand as a policy measure, scrupulous exporters are encouraged and incentivize, but at the same time it is the duty of the Government to have a check on fraudulent exports, commercial fraud to prevent the revenue leakage and outright smuggling of prohibited/restricted goods which are not permitted for export either under Customs Act or any other law for the time being in force.

In order to curb the leakage of export incentive and to prevent fraudulent exports and illegal export of restricted/prohibited goods some dedicated agency is needed to deal with such illegal and improper export of goods, this brings the concept of some specialized agency and thus agency like SIIB(X) needed and formed in Customs House to deal with such fraudulent export. SIIB(X) is dedicated agency therefore all the fraudulent export are dealt by them. Working of SIIB(X) includes gathering intelligence/information, detection of cases , investigation of such cases thereof to prove the offence of the any person concerned with fraudulent export so that subsequently adjudicatory function takes place for confiscation of goods and imposition of fine and penalty.

Objective of this E-Module – The E- module is aimed to give the basic working knowledge of functioning of SIIB(X) to Officers who are posted in SIIB(X) so that they give their assigned work desired effect in accordance with extant provision of law and carry out investigative work effectively.

Chapter 2. Roles of Special Intelligence & Investigation Branch, Export

2.1 Investigation into Fraudulent Exports of Goods-

SIIB(X) is entrusted with investigative work in respect of fraudulent export of goods and illegal export of prohibited/restricted goods, wherein undue export benefits such as drawback, MEIS , IGST etc are wrongly availed or attempted to be availed by the unscrupulous exporters by way of mis-declaration of description, value, quantity, classification, etc. Investigation into fraudulent export includes commercial fraud as well as illegal export of prohibited/restricted goods.

2.2 Gathering of information/ intelligence

SIIB (Export) gathers information/ intelligence in order to investigate cases related to fraudulent exports. This includes gathering information by human intelligence as well as data analysis.

2.3 Investigation into cases Referred by Export Docks Posted For Examination and Assessment –

SIIB(X) also causes investigation in respect of cases which are referred by Officers posted at Export Docks for examination and assessment . Export Docks Officers such as Examiner/Preventive Officers or Superintendents/Appraiser at the time of examination of export goods and assessment thereof when observed anomaly/discrepancies vis-à-vis exporter’s declaration in respect of description ,classification, value ,quantity or found declared goods in violation of Customs Act, 1962 or any allied acts in force, referred the case with the approval of superior officers to SIIB(X) for causing investigation.

2.4 Acting on Receipt of Information From Across the Agencies

SIIB(X) also causes investigation on the receipt of information from other agencies such as DRI, EDI, CBI etc and other investigating agency of other customs formations.

2.5 Examination of Export Goods

The Customs Act,1962 deals with good, therefore on receipt of information/intelligence regarding contravention of the customs law and allied acts, examination of the goods is done to detect the offence in relation to the goods under Panchnama. Examination of the export goods is one of the basic function of SIIB(X).

2.6 Search, Seizure & Arrest

Search, seizure and arrest are also essential ingredients of investigation and are part for just and fair investigation to prove the offence in respect of goods, therefore key functions of SIIB(X). These functions have dealt deliberately in Chapter 4 of this e-book.

2.7 Conducting Market Enquiry/Survey

Overvaluation of export goods by exporter is one of the main modus operandi to avail inadmissible export incentive and to bring illegal remittance into the country. In order to arrive at correct value ,market enquiry of export goods is conducted. SIIB(X) is only authorized to conduct market enquiry of export goods when goods found to be overvalued vis-a-vis exporter’s declaration. The legal backing is provided by Board Circular 56/2002-Cus 09.09.2002

2.8 Placing Alert Against the Errant Exporters-

Upon receipt of information from other agencies and on the basis of own investigation, alert is placed against the errant exporter(s) as a measure of administrative tool , which is an internal message exchange mechanism to sensitize the field formation so that exporter’s can be constantly reminded of non-compliance regarding making good of his non-compliance. Alert has many aspects , sometimes export docks officers are instructed to subject the goods to certain % of examination and in many cases examination of the goods is carried out before Officers of SIIB(X). In some cases , drawback officers/docks officers are directed to ask the exporters to comply with the submission of proof of export realization. However, keeping in pace with basic policy guidance of not withholding export shipment , current shipment found in order granted NOC by the SIIB(X).

In tune with the policy of export that genuine shipment shall not be withheld, NOC are given by the SIIB(X) for current export shipment when the export goods are in conformity with the exporter’s declaration and in accordance with law.

2.9 Modus Operandi Circulars/Alert Circulars are issued by the SIIB(X)

Whenever a newdistinct pattern or certain method of commission of offence of fraudulent export in certain way comes to notice, the field officers are required to be sensitized about the pattern of commission of fraudulent export time to time. In this regard modus operandi circulars/alert Circulars are issued by the SIIB(X) to sensitize the field formation to have a check on the attempt of fraudulent export.

2.10 Holding of Export Benefits such as Drawback, MEIS etc

During investigation of fraudulent exports, benefits such as drawback, is put on hold till the completion of investigation/adjudication proceedings by giving intimation to the drawback department. With regard to other benefits like MEIS, intimation is provided to DGFT regarding the ensuing offence of fraudulent exports, to keep the benefit on hold, till the completion of investigation. Undue IGST benefit may be kept on till the completion of investigation.

2.11 Recommendation for Cancellation of IEC and Customs Broker License

Whenever serious commission of offence regarding fraudulent export is observed, recommendation for cancellation of exporter’s IEC may be send to DGFT. Likewise for cancellation of Customs Brokers License, recommendation may be send to concerned Customs House, wherefrom license has been issued.

2.12 Verification of genuineness of First Time Exporters

In terms of Public Notice No.112/2017 dated 31.08.2017 vide F.No. S/22-Gen-343/2017-18 AM (I) issued by JNCH, SIIB(X) causes verification of the genuineness of First Time Exporters in order to put check on fly by night operators, who operates for a very limited period of time with a malafide intention of claiming/availing drawback and other related benefits and then they conceal themselves in order to avoid operation of law. Standing Order No. 37/2009, dated 01.09.2009 issued by JNCH also entrusted this responsibility on SIIB(X) regarding verification of genuineness of the exporters, who are exporting goods for the First time through JNCH.

2.13 Preparation of MTR, RTI reply, CPGRAMS & PQs etc.

SIIB(X) also prepares Monthly Technical Report (MTR) for keeping database of the cases booked and action initiated thereof regarding progress of investigation, issuance of SCN , adjudication and disposal of cases thereof . This is indicative of performance of SIIB(X) ,trends and modus operandi of the cases booked by SIIB(X). This also speaks of progress on investigation, disposal of cases, recovery of additional revenue (R.F and P.P).

The superior officers are also apprised of progress of the cases through MTR and pendency position thereof.

In addition to this, in order to be transparent, accountable and generate trust among citizens, SIIB(X) also assigned of the task of replying to RTI query , CPGRAMS and PQs in time bound manner.

2.14 Representing Department Before Various Appellate Authority and

Court of law

Booking of cases and investigation thereof often gives rise to dispute between Department and exporter/CB/Shipping Line etc. The parties take recourse to the law courts when they found investigation undertaken by the SIIB(X) connected not backed by authority of law or any decision appear not correct, illegal, malafide . Even Adjudication Orders are challenged on the ground of illegality and incorrectness. The Officers with the consultation of legal cell of Customs House causes panel counsel (lawyers) to be appointed to represent the case. The panel counsels are also briefed about the case by the Officers of SIIB(X).

Representing and defending the Department before various Appellate Authority and Court of laws entails filing of Affidavit, drafting of Para Wise Comments , Cross Objection etc.

During review by Commissioner/Chief Commissioner, departmental order of Quasi Judicial Order) of inferior authorities( Adjudicating authorities) when found incorrect and not legal , appeal is filed against such orders in terms of Section 129D of Customs Act, 1962.

2.15 Imparting Training to Officers Posted for Export Examination

The responsibility of SIIB(X) does not comes to an end with booking and investigation into cases of export fraud but it is also their duty to enlighten and sensitized the staff posted at export docks. To curb the menace of fraudulent export, the Officers posted at Export Docks are required to be sensitized with modus operandi, accordingly training should be arranged/organized time to time by SIIB(X).

2.16 SIIB (X) acts as a Coordinating Agency–

SIIB(X) also acts as coordinating agency and work in tandem with other investigating agencies like CBI, DRI, DGCEI, R&I & ED etc. Whenever intelligence/information are received by SIIB(X) , they either act upon them or provide assistance to such agencies in interception, examination and investigation into cases of fraudulent export.

2.17 Sponsoring of COFEPOSA Proposal

COFEPOSA is a preventive detention measure which provides a preventive detention of person, before engaging in organized smuggling activities. A person can be detained , on the basis of reasonable belief that if not detained, he will be engaged in smuggling activities. The detention must be as per procedure and as on substantial grounds .

Immediately after the seizure of the goods, seizing unit i.e. investigating agency (SIIB)(X) found that person is a repeated offender and it is reasonably believed that if the person remains free he has a propensity to continue smuggling activities which is prejudicial to conservation of foreign exchange, a proposal prepared for initiating action for preventive detention with the approval of Chief Commissioner of Customs who would be sponsoring authority in the case must be forwarded to Screening Committee consisting of senior police officers , DRI Officers , I-Tax officers and Senior Customs Officers who considers and makes recommendations for detention . After approval of Screening Committee, it will forwarded to detaining authority , who is not below the rank of Joint Secretary, COFEPOSA (Section 3(1) of COFEPOSA Act) will issue detention order after subjective satisfaction . Detention Order are also issued by Secretary of the State Government. As per Section 10 of COFEPOSA , maximum detention can be one year from the date of detention. However, in terms of Article 22, the detention in excess of two months of person can only be made by obtaining the opinion of Advisory Board which consists of Chairman and minimum two members. The Chairman is the sitting judge of appropriate H.C and other two members may be sitting or retired judge of any H.C. This is done to check executive highhandedness. Five set of RUDs is required to be prepared for sponsoring COFEPOSA proposal.

2.18 Launching of Prosecution in the Court of law

Prosecution means filing a criminal complaint before the court of law, in case of value of the offending goods exceeding the threshold monetary limit prescribed by the Board Circular 27/2015-Cus dated 23.10.2015 coupled with presence of guilty intention. The complaint is filed before the court of law after taking sanction for prosecution under Section 137 of the Customs Act, 1962. In cases related to fraudulent availment of drawback or attempt to avail of drawback or any exemption from duty provided under the Customs Act 1962, if the amount of drawback or exemption from duty is Rs. 1,00,00,000 (Rupees one crore) or more, prosecution may be filed. This is not required to be filed in routine manner on grounds of technical omission. Adjudication and prosecution can be initiated simultaneously.

In a recent judgement passed by Hon’ble Supreme Court of India in the case of Radhe Shyam Kejriwal [2011(266)ELT 294 (SC)], the Apex court had, interalia, observed that (i) adjudication proceedings and criminal proceedings can be launched simultaneously;(ii) decision in adjudication proceedings is not necessary before initiating criminal prosecution; (iii) adjudication proceedings and criminal proceedings are independent of each other in nature and (iv) the findings against the person facing prosecution in the adjudication proceedings is not binding on the proceeding for criminal prosecution.

This threshold monetary limit is not applicable in cases of exception and Special Cases relating to FICN, arms, ammunitions, wild life etc. lays down in Para 4.2.2 and Para 4.2.3 respectively.

2.19 Processing of Reward-

In some Customs House, in absence of Reward Section, after completion of investigation, adjudication and recovery of revenue, after expiry of appeal period ( In case of no appeal is filed) reward to Government Servants and Informers are processed in terms of Circular No. 20/2015-Cus., dated 31-7-2015 by SIIB(X) concerning their cases.

SELF TEST QUIZ (MCQ)

1.Fraudulent Export means

(i)Attempted export of restricted/ prohibited goods,

(ii)Attempt to avail undue export benefits,

(iii)Higher declaration of value than the actual price to claim undue benefits,

(iv)All of the above.

2.What is/are the functions of SIIB(X)

(i)Investigation against the fraudulent export,

(ii)Investigation against the fraudulent import ,

(iii)Placing against the errant exporters,

(iv)Gathering intelligence/ information regarding fraudulent exports

(v)All of the above.

3.Who is Authorized to Conduct Market Enquiry of Export goods ?

(i)SIIB(I)

(ii)SIIB(X)

(iii)Export Docks Officer,

(iv)Assessing Officer

4. SIIB(X) initiates investigation on the basis of

(i)Information/ intelligence,

(ii)Information from DRI/CBI etc,

(iiii)Cases referred by Export/Docks Officer,

(iv)All of the above.

5. SIIB(X) initiates investigation for the

(i)wrong availment of drawback,

(ii)undue availment of MEIS,

(iiii)Outright smuggling of prohibited goods,

(iv)All of the above.

6. Monetary limit for launching prosecution in drawback cases,

(i) Rs 50 lakhs ,

(ii) Rs 75 lakhs ,

(iii) Rs 1 Crore

(iv) None of the above

7. Sanction for prosecution is granted under which Section of the Customs Act, 1962

(i) Section 135

(ii) Section 137

(iii) Section 132

(iv) Section 136

8. Prosecution in Customs cases is launched

(i) Before Commissioner of Customs (Appeal)

(ii) Before CESTAT

(iii) Before Revisionary Authority

(iv) Before competent court

9. Verification of genuineness of First Time Exporters is done to

(i) determine FOB value of the export goods,

(ii) Have a check on Customs Brokers

(iii) To verify antecedent of the exporter

(iv) Put check on fly by night operators, who operates for a very limited period of time with a malafide intention of claiming/availing drawback benefit

10. Cancellation of IEC is done by whom

(i) Customs Authority,

(ii) SIIB(X)

(iii) DRI

(iv) DGFT

ANS 1 (iv), 2(i, iii and iv), 3(ii), 4(iv), 5(iv), 6(iii), 7(ii), 8(iv), 9(iv) 10(iv)

Chapter 3. Legal Provisions for Functioning of SIIB Export

To check fraudulent export and prevent illegal export, cases are booked, investigated to prove the offence, determine the guilt of the concerned person(s) for imposition of fine, penalty, recovery of duty/export incentive etc under customs law and allied acts, so the Officers working in SIIB(X) are expected and advised to be acquainted with the legal provisions so that it may be applied correctly and legally. Keeping in view of the requirement of investigation, efforts have been made to put all the relevant legal provisions in this Chapter along with comments/application whenever it is felt necessary. To keep the size of chapter slim, at some places entire Section have not been reproduced and only opening words with Section are mentioned.

This Chapter consists of relevant provisions of Customs Act, 1962 along with rules/regulation made there under Foreign Trade Development Act,1992, Foreign Trade (Regulations), Rules,1993, Foreign Trade Policy 2015-20, General Clauses Act,1897 and Limitation Act, 1963.

3.1 Provisions of the Customs Act, 1962

Significance of Definitions – Definitions of certain words and expressions are used elsewhere in the body of statute. The object of such a definition is to avoid the necessity of frequent repetitions of describing the subject matter to which the definition intended to apply.

The relevant definitions given under Section 2 of Chapter are following;

# Section 2(18)– “export”, with its grammatical variations and cognate expressions, means taking out of India to a place outside India;

# Section 2(19)– “export goods” means any goods which are to be taken out of India to a place outside India;

# Section 2(20) “exporter”, in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner or any person holding himself out to be the exporter;

# Section 2(22) -“goods” includes – (a) vessels, aircrafts and vehicles; (b) stores; (c) baggage; (d) currency and negotiable instruments; and (e) any other kind of movable property;

# Section 2(30)- market price”, in relation to any goods, means the wholesale price of the goods in the ordinary course of trade in India;

# Section 2(33) – prohibited goods” means any goods the import or export of which is subject to any prohibition under this Act or any other law for the time being in force but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with.

# Section2(39)– “smuggling”, in relation to any goods, means any act or omission which will render such goods liable to confiscation under section 111 or section 113;

# Section 2(41) -“value”, in relation to any goods, means the value thereof determined in accordance with the provisions of sub-section (1) of section 14;

# Section 11- Power to Prohibit Importation or Exportation of Goods. –

Comments/ Application: Section 11 of the Customs Act, 1962, gives power to the Central Government to prohibit importation or exportation of goods for certain purposes by issuance of Notification. The purposes are referred in sub-section (2). A plain reading of the provisions shows that Customs Officer will come into the field of implementation , when for the specific purpose notification has been issued .Only upon issuance of Notification , violation of allied act(s) viz treaty, agreement will become actionable under Customs Act.

Further, by the Finance Act, 2018, sub-clause 11(3) has been inserted which says that any prohibition, or restriction or obligation which has been notified under any allied law(s) will automatically not becomes prohibited /restricted until and unless it is not notified under Customs Act. However this new clause is yet to be notified.

# SECTION 14 –Valuation of Goods.–

Comments/ Application- It is applicable for export as well as for imported goods. Reading of the section indicates that, this is applicable for determination of value of export goods in terms of definition given under section 2(41) of the Act read with Customs Valuation (Determination of Value of Export Goods) Rules, 2007.

# SECTION28AAA– Recovery of Duties in Certain Cases.—

Comments/ Application:

Inserted by Finance Act 2018 w.e.f 28.05.2012. Now Section 28AAA being in force , the duty against the scrips can be demanded either from the exporter or from person to whom the license has been transferred. The condition existing must be of misstatement or suppression of facts or collusion .These conditions are similar to fraud. What it follows that this section is operational only in cases of fraud . Second condition is that demand of duty can only be raised against the utilization of instrument (authorization, scrip, or license or certificate etc issued under FTDR Act, 1992 bestowing financial or fiscal benefits issued under reward scheme, remission or under any incentive scheme.

# Section 50- Entry of Goods for Exportation

Comments/ Application:This section is pari materia with section 46 of the Customs Act.S/Bill are presented under this provision to Customs Authority . The exporter are bounded to declare truthfully contents of S/Bills. Sub-clause Section (3) has been inserted vide Finance Act, 2018,which put onus of correct information on exporter in respect of accuracy , completeness, authenticity and validity of supporting documents, compliance with the prohibition/restriction under any other law for the time being in force.

# Section 51- Clearance of Goods for Exportation. –

Comments/ application- Appraiser/Superintendent of Customs gives Let Export Order(LEO) under this section after presentation of S/Bill under Section 50, when he is satisfied that goods are not prohibited and duty if any has been paid. Before given LEO it is also ensured that it complies with all the extant provisions of law.

# Section 76- Prohibition and Regulation of Drawback in Certain Cases. –

Comments/ application- This section enumerates two conditions when this prohibition would be applied;

(a) in respect of any goods the market -price is less than the amount of drawback due thereon;

(b) where the drawback due in respect of any goods is less than fifty rupees.

(2) It lays down provision for issuance of notification for such goods which can be smuggled back in India concerning drawback subject to restriction/conditions and says that in such case either drawback prohibited or regulated.

# Section 104- Power to Arrest. – It deals with arrest under Customs Act.

Comments/ application – Under Customs Law arrest is effected without warrant . Arrest of a person involved in fraudulent export of goods might be necessary under following circ*mstances;

For securing attendance of an accused in a trial ;
As a preventive or precautionary measure;
To prevent tampering of evidence and influencing witnesses;

Arrest of the person under Section 104 of the Customs Act, 1962 is effected for the violation of Section 132, 133, 134, 135, 135A and 136 of the Customs Act, 1962.

Section 136 is applicable for departmental officers, when offence is alleged to have been committed by them.

Intelligence Officers (Inspectors/Examiners) are the proper officer, who arrest a person accused of contravening the provisions of customs law under section 104 of the Customs Act, 1962 read with Section 132, 133, 134, 135 , 135A and 136 of the Customs Act, 1962. The threshold monetary limit has been prescribed by Board Circular 28/2015 dated 23. 10.2015 read with Board Circular 38 /2013 dated 17.09.2013, for making arrest.

# Section 105- Power to Search Premises. –

Comments/ application- The object of this Section is to make a search for the goods liable to be confiscated or recovery of documents secreted in any place which are relevant to any proceedings under the Customs Act. When such goods, things and documents could not be produced by the person summoned or upon enquiry taken against him by requisition under the authority of Section 107 or 108, action under Section 105 is initiated.

# Section 106- Power to Stop and Search Conveyances. –

Comments/application- This section is applied for aircraft, vehicle or vessel or on the animal, which are used as a conveyance for carriage of smuggled goods. The power to stop and search is inherent or implied with power to verify and check. This power is applied to check smuggling activities based on reasonable belief formed by the Officer. In one case of State of Maharashtra v Natwarlal Damodar Das Soni, the Hon’ble S.C has held that even if the search was illegal, it will not vitiate the seizure of articles, subsequent investigation and trial and conviction.

# Section 107 of the Customs Act– Power to Examine Person–

Comments/application-Under this provision , any officer of customs empowered by general or special order of the Commissioner of Customs initiate enquiry against any person requiring him to produce any document or he can examine any person who is acquainted with the facts and circ*mstances of the case.

# Section 108- Power to Summon Person(s ) to Give Evidence and Produce Documents.—

Comments/application- This is a machinery section to gather evidence in case of violations/offence under Customs Act and allied act(s). The power of recording of statement and calling for documents is vested in Officers not lower than Superintendent and Appraiser (AO in short) in rank. Whoever found involved in violation of customs law and/or any other allied act(s), his/her statement is recorded to gather evidence in order to establish the charges and bring guilty at home. The statement recorded under customs act, is an admissible piece of material evidence and admitted before the Court of Law.

# Section 108A- Obligation to Furnish Information and Section 108B

By the insertion of Section 108A and 108B vide Notification No 25/2017-customs dated 28.06.2017, teeth has been provided to Section 108 of the Customs Act, 1962. It has made the furnishing of information obligatory on the concerned person enumerated from (a) to (q), who are responsible for maintaining records and in case of failure to do so in prescribed period it has also provided penal provisions.

# Section 110- Seizure of Goods, Documents and Things

Comments/ application – Section 110(1) authorizes the proper officer to seize any goods , documents and things which he has reason to believe are liable to confiscation. The sub-clause (2) strike a balance between power of authorities of search and seizure and individual’s right to the goods which are seized and lays down a limitation that goods so seized are liable to returned to the owner on the expiry of six months or extended period , if proceedings of confiscation has not been initiated under section 124(a) of the Act. Limitation has been prescribed for time period, the goods can be held back, however it is not a limitation for imposition of penalty and confiscation of goods. The Supreme Court in the case of Asstt Collector of customs Charan Das Malhotra 1972, SCC, has held that right of restoration of goods is a civil right and after expiry of six months , right accrues to the affected person. Under sub-section.

3.2 Relevant Provisions of Allied Acts Applicable in Fraudulent Export of Goods

# Section 11(1) of the Foreign Trade (Development and Regulation) Act, 1992: -“No export or import shall be made by any person except in accordance with the provisions of this Act, the rules and orders made there under and the export and import policy (now termed as Foreign Trade Policy) for the time being in force”

Comments/Application-This section prescribes that export shall be affected in accordance of the Foreign Trade (Development and Regulation)Act,1992 or rule or orders made thereunder. In other words any infringement of any of the rule or order violates this section also.

# Rule 11 of the Foreign Trade (Regulations),1993 stipulates that on exportation out of any customs port of any goods, whether liable to duty or not ,the owner of the such goods shall in the s/bill or any other documents prescribed under the customs act,1962,state the value, quantity and description of such goods to the best of his knowledge and belief and certify that the quality and specifications of the goods as stated in those documents ,are in accordance with the terms of the export contract entered into with the buyer or consignee in pursuance of which the goods are being exported and shall subscribe a truthful declaration of such statement at the foot of such shipping bill or any other documents.

Comments/Application -This rule mandates for truthful and correct declaration by the exporter regarding the value quantity and description. Any wrong declaration by the exporter attracts this provision. When the exporter did not make a correct declaration of the quantity , description and value of the goods, in the Shipping Bills and relevant export documents, submitted by them to the Customs authorities, he violates the provisions of Rule 11 of the Foreign Trade (Regulations)1993 inasmuch.

#Rule 14 of the Foreign Trade (Regulations), Rules, 1993 stipulates that no person shall make, sign or use or cause to be made, signed or used any declaration, statement or documents for the purposes of obtaining a license or importing any goods or documents knowing or reason to believe to believe that such declaration, statement or documents is false in any material particular.

Comments/Application -This rule get attracted in case of false declaration, statement or documents which is in prior knowledge of the exporter and done to obtain license fraudulently.

# Regulation 3 of the Foreign Exchange Management Act,2000 provides that every exporter of goods or software in physical form or through any other form, either directly or indirectly, to any place outside India, other than Nepal and Bhutan, shall furnish to the specified authority, a declaration in one of the forms set out in schedule and supported by such evidence as may be specified, containing true and correct material particulars including the amount representing –

The full export value of the goods or software; or

If the full export value is not ascertainable at the time of export, the value which the exporter having regard to the prevailing market conditions expects to receive on the sale of the goods or the software in overseas market, and affirms in the said declaration that the full export value of the goods (whether ascertainable at the time of export or not) or the software has been or will within the specified period be, paid in the specified manner. Declaration shall be executed in sets of such numbers as specified.

Comments/Application- This also lays down emphasis on truthful declaration of export value of goods .

3.3 Provisions of Foreign Trade Policy

#Para 1.24 of the Foreign Trade Policy 2015-20: No seizure of export related Stock No seizure shall be made by any agency so as to disrupt manufacturing activity and delivery schedule of exports. In exceptional cases, concerned agency may seize the stock on the basis of prima facie evidence of serious irregularity. However, such seizure should be lifted within 7 days unless the irregularities are substantiated.

Comments/Application- It lays down a general policy decision that no seizure of export goods may be made as it disrupts the business cycle . It is merely highlighting the significance of genuine export. It is not binding upon revenue authorities and it per se make departure in serious irregularities.

#Para 2.01- Exports and Imports – ‘Free’, unless regulated (a) Exports and Imports shall be ‘Free’ except when regulated by way of ‘prohibition’, ‘restriction’ or ‘exclusive trading through State Trading Enterprises (STEs)’ as laid down in Indian Trade Classification (Harmonized System) [ITC (HS)] of Exports and Imports. The list of ‘Prohibited’, ‘Restricted’, and STE items can be viewed by clicking on ‘Downloads’ at http://dgft.gov.in (b) Further, there are some items which are ‘free’ for import/export, but subject to conditions stipulated in other Acts or in law for the time being in force.

#Para 2.08- Export/Import of Restricted Goods/Services- Any goods /service, the export or import of which is ‘Restricted’ may be exported or imported only in accordance with an Authorization/Permission or in accordance with the Procedures prescribed in a Notification / Public Notice issued in this regard. 2.09 Export of SCOMET Items Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET), as indicated in Appendix-3 of Schedule 2 of ITC(HS) Classification of Export & Import Items, shall be governed by the specific provisions of (i) Chapter IV A of the FT(D&R) Act, 1992 as amended from time to time (ii) Sl. No. 4 & 5 of Table A and Appendix-3 of Schedule 2 of ITC(HS) Classification of Export & Import Items (iii) Para 2.16, Para 2.17, Para 2.18 of FTP and (iv) Para 2.73 -2.82 of Hand Book of Procedures, in addition to the other provisions of FTP and Handbook of Procedures governing export Authorizations.

#Para 2.16 Prohibition on Import and Export of ‘Arms and related material’ from / to Iraq -Notwithstanding the policy on Arms and related materials in Chapter 93 of ITC(HS), the import/export of Arms and related material from/to Iraq is ‘Prohibited’. However, export of Arms and related material to Government of Iraq shall be permitted subject to ‘No Objection Certificate’ from the Department of Defence Production.

#Para 2.17 Prohibition on direct or indirect import and export from/to DPRK Direct or Indirect export and import of items, whether or not originating in Democratic People’s Republic of Korea (DPRK) to/from DPRK is detailed in Appendix – I of FTP.

#Para 2.18- Direct or Indirect Export/Import to/from Iran (a) Direct or indirect export to Iran or import from Iran of any item, material, equipment, goods and technology mentioned in the following documents would be permitted subject to the provisions contained in Annex-B to the United Nations Security Council Resolution 2231 (2015): (i) Items listed in INFCIRC/254/Rev.9/Part 1 and INFCIRC /254/Rev.7 /Part 2 (IAEA Documents) as updated by the IAEA from time to time. (ii) Items listed in S/2006/263 (UN Security Council document) as updated by the Security Council from time to time. (b) All the UN Security Council Resolutions/Documents and IAEA Documents referred to above are available on the UN Security Council website (www.un.org/Docs/sc) and IAEA website (www.iaea.org).

#Para 2.39 Free Exports– All goods may be exported without any restriction except to the extent that such exports are regulated by ITC (HS) or any other provision of FTP or any other law for the time being in force. DGFT may, however, specify through a public notice such terms and conditions according to which any goods, not included in ITC (HS), may be exported without an Authorisation.

#Para 2.42- Third Party Exports- Third party exports (except Deemed Export) as defined in Chapter 9 shall be allowed under FTP. In such cases, export documents such as shipping bill shall indicate name of both manufacturing exporter/manufacturer and third party exporter(s). Bank Realization Certificate (BRC), Export Order and Invoice should be in the name of third party exporter.

#Para 2.53- Export to Iran –Realisations in Indian Rupees to be eligible for FTP benefits / incentives Notwithstanding the provisions contained in para 2.52 (a) above, export proceeds realized in Indian Rupees against exports to Iran are permitted to 44 avail exports benefits / incentives under the Foreign Trade Policy (2015- 20), at par with export proceeds realized in freely convertible currency.

#Para 2.54- Non-Realisation of Export Proceeds (a) If an exporter fails to realize export proceeds within time specified by RBI, he shall, without prejudice to any liability or penalty under any law in force, be liable to return all benefits / incentives availed against such exports and action in accordance with provisions of FT (D&R) Act, Rules and Orders made there under and FTP. (b) In case an Exporter is unable to realize the export proceeds for reasons beyond his control (force-majeure), he may approach RBI for writing off the unrealised amount as laid down in Para 2.87 of Handbook of Procedures. (c) The payment realized through insurance cover, would be eligible for benefits under FTP as per Procedures laid down in Para 2.85 of Handbook of Procedures.

#Para 9.21- “Exporter” means a person who exports or intends to export and hold an IEC number, unless otherwise specifically exempted.

#Para 9.22-“Export Obligation” means obligation to export product or products covered by Authorisation or permission in terms of quantity, value or both, as may be prescribed or specified by Regional or competent authority.

#Para 9.41 “Prohibited” indicates the import/export policy of an item, as appearing in ITC (HS) or elsewhere, whose import or export is not permitted.

#Para 9.60 “Third-party exports” means exports made by an exporter or manufacturer on behalf of another exporter(s). In such cases, export documents such as shipping bills shall indicate names of both manufacturer exporter/manufacturer and third party exporter(s). Bank Realisation Certificate (BRC), Self Declaration Form (SDF), export order and invoice should be in the name of third party exporter.

3.4 Provisions of General Clauses Act, 1897

#Section 9. Commencement and Termination of Time

In any [Central Act] or Regulation made after the commencement of this Act, it shall be sufficient, for the purpose of excluding the first in a series of days or any other period of time to use the word “from”, and, for the purpose of including the last in a series of days or any other period of time, to use the word “to”.

(2) This section applies also to all 12[Central Acts] made after the third day of January, 1868, and to all Regulations made on or after the fourteenth day of January, 1887.

Comments/Application- It is applied for computing the time period for viz issuance of Show Cause Notice. The first date of seizure/ detention is excluded while computing the period of six months or permitted extended period of one year for the purpose of given SCN.

#Section 10. Computation of Time

(1) Where, by any [Central Act ] or Regulation made after the commencement of this Act, any act or proceeding is directed or allowed to be done or taken in any Court or office on a certain day or within a prescribed period, then, if the Court or office is closed on that day or the last day of the prescribed period, the act or proceedings shall be considered as done or taken in due time if it is done or taken on the next day afterwards on which the Court or office is open:

PROVIDEDthat nothing in this section shall apply to any act or proceeding to which the [Indian Limitation Act, 1877 (15 of 1877)], applies.

(2) This section applies also to all [Central Acts] or Regulations made on or after the fourteenth day of January, 1887.

Comments/Application- If the SCN is required is required to issued on Saturday , then issuance on Monday will be well within the limitation period.

#Section 27- Meaning of Service by Post

Where any Central Act or Regulation made after the commencement of this Act authorizes or requires any document to be served by post, where the expression “serve” or either of the expressions “give” or “send” or any other expression is used, then, unless a different intention appears, the service shall be deemed to be effected by properly addressing, pre-paying and posting by registered post, a letter containing the document, and, unless the contrary is proved, to have been effected at the time at which the letter would be delivered in the ordinary course of post.

Comments/Application- Section 27 of General Clause Act, 1897, may be read in tandem with Section 153 of the Customs Act, 1962 .

3.5. Provisions of Limitation Act,1963 Applicable in Investigation of Fraudulent Export Conducted by SIIB(X)

#Section 4. Expiry of prescribed period when court is closed.—Where the prescribed period for any suit, appeal or application expires on a day when the court is closed, the suit, appeal or application may be instituted, preferred or made on the day when the court re-opens. Explanation.—A court shall be deemed to be closed on any day within the meaning of this section if during any part of its normal working hours it remains closed on that day.

Comments/Application- This section does not exceed period of limitation but it provides for contingency when the prescribed period expires on a holiday. Appeal can be preferred on the day court re-opens.

#Section 12– Exclusion of Time in Legal proceedings.—(1) In computing the period of limitation for any suit, appeal or application, the day from which such period is to be reckoned, shall be excluded. (2) In computing the period of limitation for an appeal or an application for leave to appeal or for revision or for review of a judgment, the day on which the judgment complained of was pronounced and the time requisite for obtaining a copy of the decree, sentence or order appealed from or sought to be revised or reviewed shall be excluded. (3) Where a decree or order is appealed from or sought to be revised or reviewed, or where an application is made for leave to appeal from a decree or order, the time requisite for obtaining a copy of the judgment 1 *** shall also be excluded. (4) In computing the period of limitation for an application to set aside an award, the time requisite for obtaining a copy of the award shall be excluded. Explanation.—In computing under this section the time requisite for obtaining a copy of a decree or an order, any time taken by the court to prepare the decree or order before an application for a copy thereof is made shall not be excluded.

SELF TEST QUIZ on Rules & Regulations Applicable in SIIB(x)

1.Under which Section the exporter of any goods, while presenting a shipping bill or bill of export, shall at the foot thereof make and subscribe to a declaration as to the truth of its contents ?

(i)Section 51

(ii)Section 50

(iii)Section 114

(iv)Section 113

2. Which Section of the Customs Act, 1962, gives power to the Central Government to prohibit importation or exportation of goods for certain purposes

(i)Section 2(33)

(ii)Section 113

(iii)Section 11

(iv)Section 2(41)

3. Exporter is defined under which sub-section of Section 2?

(i)Section 2(41)

(ii)Section 2 (19)

(iii)Section 2(20)

(iv)Section 2(18)

4. Under Section 2(30) market price”, in relation to any goods, means

(i)the retail price of the goods in the ordinary course of trade in India

(ii)the wholesale price of the goods in the ordinary course of trade in India

(iii)Both

(iv)None of the above

5. As per Section 2(33) any goods will be prohibited if

(i)the import or export of which is subject to any prohibition under this Act,

(ii)or any other law for the time being in force ,

(iii)but does not include any such goods in respect of which the conditions subject to which the goods are permitted to be imported or exported have been complied with.

(iv)All of the above.

6. Recovery of duties against instruments (means any scrip or authorisation or licence or certificate which has been obtained by him by means of collusion; or wilful misstatement; or suppression of facts is initiated under which of the following Section

(i)Section 28

(ii)Section 28AA

(iii)Section 28AAA

(iv)None of the above.

7. Let Export Order is given under which Section of the Customs Act, 1962 ?

(i) Section 50

(ii) Section 51

(iii) Section 47

(iv)Section 68

8. Under which Section drawback is inadmissible in respect of any goods the market price of which is less than the amount of drawback due thereon ?

(i) Under Section 75

(ii) Section 76(1)(b)

(iii) Section 76(i)(c )

(iv)None of the above

9. Under which Section search of the premises is conducted?

(i) Section 104

(ii) Section 105

(iii) Section 110

(iv)Section 106

10.Who is competent authority to give orders for arrest of a person u/s 104 of the Act ?

(i)Asstt Commissioner of Customs,

(ii)Commissioner of Customs

(iii)Additional Commissioner of Customs

(iv)Joint Commissioner of Customs

11. Under Section 108. Who is empowered to summon persons to give evidence and produce documents.—

(i)Asstt Commissioner of Customs,

(ii)Joint Commissioner of Customs

(iii)Any gazetted officer of customs

(iv)All of the above

12. Under which Section of the Customs Act, 1962 seizure of goods is effected?

(i) Section 110A

(ii) Section 105

(iii) Section 110

(iv)Section 106

13. Who is competent authority to provisionally release the seized goods ?

(i)Asstt Commissioner of Customs,

(ii)Joint Commissioner of Customs

(iii)Any gazetted officer of customs

(iv)Adjudicating authority of customs

14. Under which sub-section of Section 113, mis-declaration of value of any export goods entered for exportation is investigated ?

(i) Section 113(i)

(ii) Section 113(h)

(iii) Section 113(f)

(iv)Section 113(b)

15. Under which sub-section of Section 114, exporter is penalized for export of prohibited goods ?

(i) Section 114(i)

(ii) Section 114(ii)

(iii) Section 114(iii)

(iv) All of the above

16. Under Section 114AA, how much penalty is prescribed for intentionally using false declaration/statement/document ?

(i)not exceeding five times the value of goods.

(ii)Penalty equal to value of the goods

(iii)Penalty twice the value of the goods

(iv)Not exceeding 1 lakhs Rupees

17. A person shall be liable to a penalty not exceeding one lakh rupees for the contravention of provisions of this act under which section of the Customs Act ?

(i) Section 114(i)

(ii) Section 114AA

(iii) Section 117

(iv) None of the above

18. Under Section 124 of the Customs Act, 1962 , exporter may have a

(i)Written show cause notice before confiscation of goods,

(ii)Oral show cause notice before confiscation of goods,

(iii)Both

(iv)None of the above.

19. Under which section of the Customs Act, 1962 maximum punishment may extend to seven years of imprisonment ?

(i)Section 132

(ii)Section 133

(iii)Section 135

(iv)Section 136

20. Under Section 135A, is invokable wherein punishment is prescribed for which may extend to three years, or with fine or with both

(i)Preparation of export

(ii)Preparation of import

(iii)Both

(iv)None of the above

21. Which one of the following is ingredient of Third party exports under Para 2.42 under FTP 2015-2020 ?

(i)export documents such as shipping bill shall indicate name of both manufacturing exporter/manufacturer and third party exporter(s).

(ii)Bank Realization Certificate (BRC), in the name of third party exporter

(iii)Export Order and Invoice should be in the name of third party exporter

(iv)All of the above

(v)None of the above.

22. When the exporter did not make a correct declaration of the quantity , description and value of the goods, in the Shipping Bills and relevant export documents, submitted by them to the Customs authorities, which provisions is/are violated

(i)Rule 11 the Foreign Trade (Regulations)1993 inasmuch

(ii)Section 50 of the Customs Act, 1962

(iii)Both of the above

(iv)None of the above

23. Which provisions of the Foreign Trade Policy 2015-20 says that :No seizure of export related Stock shall be made by any agency so as to disrupt manufacturing activity and delivery schedule of exports;

(i) Para 1.24

(ii) Para 9.22

(iii) Para 2.17

(iv) Para 2.01

24. Prohibited is defined under which provisions/ section

(i)Para 9.41 of FTP 2015-20

(ii)Section 2(33)

(iii)Both

(iv)None of the above

25. If the last day of serving SCN is falls on Saturday, then by mandate of which provisions of allied act , SCN can be served on Monday and it will not be time barred

(i)Section 10 of the General Clauses Act

(ii)Section 27 of the General Clauses Act

(iii)Section 4 of Limitation Act, 1963

(iv)None of the above

Ans- 1(ii), 2(iii), 3(iii), 4(ii), 5(i,ii), 6(iii), 7(ii), 8(ii), 9(ii), 10(ii), 11(iv), 12(iii),13(iv), 14(i),

15(i), 16((i), 17(iii), 18(iii), 19(iii), 20(i), 21(iv), 22(iii), 23(i), 24(i),25(i)

Chapter 4 : How to Conduct Investigation in SIIB Export [SIIB (x)]

4.0 Meaning and Purpose

In this chapter we will discuss, meaning of investigation, how to cause investigation and the important ingredients of investigation. Investigation in respect of fraudulent export is done under the mandate of the various provisions of the Customs Act, 1962 and the Allied Acts.

Investigation and Enquiry under CrPC

The word investigation has not been defined under Customs Act, but it is defined under CrPC, 1973. Under Section 2(h) of CrPC , 1973 , investigation has been defined as follows;

“Investigation” includes all the proceedings under this Code for the collection of evidence conducted by a police officer or by any person (other than a Magistrate) who is authorized by a Magistrate in this behalf;”

Investigation consists of steps taken by a police officer other than a Magistrate to ascertain whether any offence has been committed at all and, if so, by whom and what is the evidence on which the prosecution can be based. Investigation can also be made by a person specially authorized by a Magistrate to do so. The case is only started if investigation by the police reveals that an offence has been committed by the accused, otherwise not.

In common parlance, investigation and enquiry is used interchangeably but distinctions have been made in CrPC. Inquiry has also been defined under Section 2(g) of CrPC,1973 as under

“It means every inquiry other than trial conducted under the CrPC by a Magistrate or Court.”

Section 159 of the CrPC empowers a Magistrate on receipt of a police report under Section 157, Cr.PC. to hold a preliminary inquiry in order to ascertain whether an offence has been committed and, if so, whether any persons should be put under trial. In cases triable by the court of sessions, the committed proceedings take place before a Magistrate, which are in the nature of an inquiry preparatory to sending the accused to take his trial before the Court of Session.

Investigation Under Customs Act

In view of the definition discussed above, investigation and enquiry operates in two different spheres under CrPC . Investigation conducted by Customs Officers in respect of illegal export/fraudulent export and collection of evidence thereof to establish the offence for starting confiscatory proceedings for imposition of fine and penalty would amount to investigation.

Investigation constitutes one of the main functions of Intelligence Branch of the Customs Department to establish the offence of the exporter/importer/any other related person. Efficient investigation is essential for proving the guilt under the Customs Act. It varies on case-to-case basis, but some general rules regarding investigation under customs law has to be followed. The Customs Act, 1962 is primarily deals with importation and exportation of goods and role of concerned persons related thereto. Therefore, Customs Officers are required to detect each and every aspect of offending goods viz its origin, modes of transportation, contravention of relevant provisions of customs law and/or allied laws, persons concerned with the smuggling activities viz exporter/importer, Customs Broker, Shipping Line, Custodian or any other persons etc. This enjoins the customs officers to be well versed with the relevant laws and they are expected to be acquainted with the statutory provisions, rules/regulation to bring the investigation to a logical conclusion.

In view the above, investigation of fraudulent export of goods broadly covers several aspects including following essential points:

Gathering of intelligence/information, that includes human intelligence and data analysis as well.
Detention/withholding of export consignment either at CFS/ICD or at Port terminal. This entails recalling of export containers from voyage also.
Examination, seizure of detained export goods and forwarding of seizure report (DRI-II) wherever applicable.
Provisional release of seized goods by adjudicating authority.
Forwarding of samples for chemical test and lab analysis.
Determination of value of export goods under Customs Valuation Rules, 2007 and conducting market enquiry of goods wherever applicable.
Summoning of person (s) connected with the investigation and recording of their statements for collection of evidence u/s 108 of Customs Act, 1962.
Address Verification of the exporter’s declared IEC address through jurisdictional competent Customs authority in order to ascertain genuineness of IEC.
Conducting searches u/s 105 of the Customs Act, 1962 with the approval of competent Customs Authority under reasonable belief that incriminating goods/documents/things etc. have been secreted in the premises.
Effecting arrest of the person(s) u/s 104 of the Customs Act, 1962 for the violation of Section 132, 133, 134, 135, 135A and 136 of the Customs Act, 1962. Section 136 is applicable for departmental officers, when offence is alleged to have been committed by them.
Calling of Call Data Records (CDR) of the person(s) covered under the purview of investigation. This assumes importance when the investigation pertains to fraudulent export of prohibited /restricted goods.
Making enquiry from Cyber Cell of Police to verify the genuineness of email- id used in the fraudulent transaction of smuggling activities.
Seizure/freezing of bank accounts of exporters, if found to be involved into illegal export and illegitimate proceeds have been transacted through.
Enquiry through RTO regarding vehicles used in transportation of fraudulent export of goods to ascertain the identity of the persons involved. This is an invariable requirement of investigation in cases of smuggling of prohibited/restricted goods such as Red Sanders.
Aid of Bank is also taken to verify the identity and address of the exporter, used for opening the account for the purpose of remittances and/or drawback, in instances of fake/bogus IEC.
Issuance of Show Cause Notice under Section 124 of the Customs Act, 1962.

4.1 Gathering of Intelligence/Information and Preparation of DRI-I

This is one of the basic and important functions of any intelligence agency for, it being cornerstone of running the agency and pursuing its objectives. The intelligence gathering network which relies on traditional human intelligence resources as well as contemporary technical gathering tools provides inputs to the agencies to act upon. To achieve this end, intelligence/information are scrutinized and filtered enabling the same to actionable intelligence.

Broadly intelligence is classified into two categories firstly human intelligence and secondly data analysis. There are many modes/sources of receiving Information such as e-mails, phone calls, letters, business rivalry, sharing of data/information by other intelligence agency such as DRI, ED , DGCEI, R&I, CIU and other customs formation etc. After the receipt of information, it is examined and analyzed and if found to be prima facie correct/actionable, it is further developed.

The intelligence/information is recorded under DRI-I (a specific mechanism for recording of information which also enables the informers for rewards) specifically, maintained in a database termed as DRI-I register. In addition to the information, cases are also detected and investigated on the basis of intelligence gathered and developed through analysis of import/export data. EDI system plays a great role in retrieving of desired data. Here analysis of data becomes important and need to be understand with regard to trend of export. Anything contrary to trend must be studied and analyzed for detection of offence.

For example,

If there is sudden surge in volume of a particular commodity to any country, it must be viewed with suspicion and further analyzed in terms of demand of such item in importing country.
The country” A” is not known for importing a product “B” from India and suddenly export of “B” started, it must be seen with suspicion and further analyzed for development of intelligence.
Even certain CFS/ICD are known for export of particular item, all on sudden it is found that certain commodity being exported , other than the known commodity, it must be scrutinized and analyzed in order to detect case.
Instances have come to notice that from certain CFS/ICD, a particular no of S/Bills are filed for export of goods, unexpectedly it is found sudden spurt in no of S/Bills, this also gives rise to suspicion.

SIIB(X) too, collects intelligence/information in the same manner and books cases of fraudulent exports.

Based upon the trend of booked cases in the past, SIIB(X) disseminates intelligence to the field formations by way of Alert Circulars or Modus Operandi Circulars. By the way of maintaining seizure register which is called J-35 register, it keeps statistics of seizures of cases for watching trends of smuggling, movement of other contraband.

4.2 Detention/Withholding of Export Consignments at ICD/CFS/ Port Terminal. (This entails recalling of export containers from voyages also)

After the receipt of information/ intelligence, immediately consignment is withheld/detained the, which may be either FCL (Full Container load) or LCL(Less container load) cargo.

Retrieval of Data

In order to stop the consignment, exporter’s name, Shipping Bill No, Container No. if any, and CFS/ICD/Port terminal details are urgently required. If the information is lacking in any such details, then relevant details may be retrieved from EDI system or obtained through enquiry with concerned Exporter, CHA, Shipping line, CFS /Port Terminal Staff etc. Subsequently, through letter, fax, e-mail or even by telephonic message, depending upon the urgency of the matter, consignments are caused to be stopped/detained for further investigation in the matter. Detention by telephonic message must be followed by letter/fax letter.

Information Received After Working Hours or on Holiday

Many instances have come to notice regarding receipt of information after working hours or on holiday, in such cases, officers cannot afford to wait for office to be re-open in view of urgency of matter as consignment is required to be stopped immediately after locating the same at ICD/CFS or at port terminal. Any delayed action will lead to replacement of the cargo or diverting the container to some warehouse or some place where it can be concealed as they have their own network for doing nefarious activities. unscrupulous exporter can take their chances by

Recalling of the Cargo From Voyage

Delay in stopping the consignment which are already on voyage may lead to arrival, unloading of consignment at destination port, discharge and clearance thereof in importing country. After discharge, such consignment would be governed by land of the law of importing country and recalling of container will become difficult or nearly impossible . Sometimes on the basis of information/intelligence, containers are recalled even after sailing off the vessels. In such case, instruction passed to the concerned Shipping Line to recall the container to the port of shipment. After reaching to the port of shipment, containers are escorted under preventive supervision to preferred CFS or to such CFS wherefrom clearance (Let Export Order) has been given to carry out the examination of the consignment. Containers are kept at the CFS brought under preventive supervision under intimation to Custodian and under acknowledgement .

Recalling of the LCL Cargo From Voyage

When intelligence/information is related to LCL export cargo covered under a S/Bill belonging to a particular exporter , which is containing LCL cargo of various other exporters and the vessel having said LCL cargo (For which intelligence/information has been received) has sailed off, then information/intelligence must be scrutinized carefully and acted upon if it is from reliable sources and of goods quality. Based on this, investigation may be initiated, otherwise recalling of container carrying such LCL cargo , would result into calling of entire goods stuffed into container of various remaining exporters and this will cause undue hardship to genuine exporters and increase the transaction cost and time of rest of the exporters. Officers working in SIIB(X) should exercise prudence and caution before resorting to recalling LCL cargo and initiate investigation only on sound reasonable belief and not on flimsy grounds.

Exporter to Incur the Liabilities of Incidental Operations

Meanwhile, CB (Customs Broker) and exporter are informed regarding the detention of the consignments and they are also instructed to facilitate the examination of detained goods. Sometimes, it is observed that owners/ exporters of detained goods initially do not come forward and also not co-operate with the detention and shifting of detained goods to CFS and even in some cases decline to bear the expenses of shifting and examination of the detained goods. This creates a tricky situation and delay the proceedings.

The Officers should be aware that for shifting and conducting examination of such goods, exporters have to bear cost towards labour , presentation of the goods for examination and testing of samples etc. As per Section 145 of the Customs Act, 1962, all the incidental operations have to be performed by the exporters and expenses incurred if any as stated above have to bear by them.

Ambiguities Faced by Officers with Regard to Detention and Seizure

There is common confusion among field formation whether limitation period prescribed for the issuance of Show Cause Notice (upon culmination of investigation) starts from date of detention or from seizure of goods under section 110 of the Customs Act, 1962. General perceptions have it that, limitations of issuance of SCN u/s 124 read with section 110(2) starts from the moment the goods are seized and not from the date of detention, whereas, legally, it is settled that the aforesaid limitations starts from the detention of the goods.

In view of general principle of law and in terms of right to property guaranteed under Article 300A ,exporter hold a constitutional right over his export goods. And even detention by the Investigating Agency causes to deprive his right over export goods to deal with it in any manner, therefore detention as well as seizure makes no difference to the exporter, hence law of limitation prescribed by the Customs Act, 1962 for issuance of SCN under Section 110(2) r/w 124 will be computed from date of detention and not from date of seizure .

Detention of Export Goods Prior or Post Let Export Order (LEO)

Export goods are detained by the Intelligence Agencies either prior to LEO or post LEO. Under scheme of the Customs Act, attempt of illegal export of goods is punishable , therefore when goods are intercepted/detained even before LEO after carting in the CFS or at the stage of registration or examination, it can be detained. Interception and detention is also effected post LEO.

Sometimes, during during investigation, exporters come out a defence that clearance for export (LEO) has been given by the Customs Officers , so the goods is properly passed under Section 51 of the Customs Act, 1962, hence detention is not legal and not backed by any authority of law .

It is true that under Customs Act, 1962 for detention of the export goods, no express provisions has been prescribed by the Act. This does not implies that customs authority cannot detain the goods post LEO, if this assumption is believed, it will render entire scheme of customs act redundant and investigation of past exports cannot be taken up after LEO by any stretch of imagination. Bare reading of the Section 113 indicates that export goods which is reasonably believed to be liable to confiscation, can be taken up for investigation and confiscation thereof. At the most, since goods have already been exported , it may not attract redemption fine (as goods are not redeemed/returned to exporter) )during adjudication proceeding.

On a similar line, investigation into past import is also effected for recovery of duty under Section 28 of this Act, though the goods are already cleared from customs fold. For the recovery of duty under customs act for imported and cleared goods, Section 28 is pressed into services, only after clearance of goods under Section 47. In other words, Section 28 is only followed by Section 47, if this assumption of goods properly passed, hence no action can be taken, found to be correct, then recovery cannot be made in cases of goods cleared under Section 47 of the Act. Section 47 and 51 are analogous provisions.

4.3 Examination and Seizure of Detained Export Goods.

Post detention, export goods are examined by Preventive Officer/Examining Officer posted in SIIB(X) as Intelligence Officer(I.O.) under supervision of Superintendent/Appraising Officer in respect of, quantity, weight, description, marks and no, classification, value, claim of export benefits/incentives in terms of exporter’s declaration u/s 50 of Customs Act, 1962. Here, definition of examination given under Section 2(17) is relevant which reads as under;

“Examination”, in relation to any goods, includes measurement and weighment thereof”.

Reading of the same indicates that it is inclusive definition therefore during examination of goods weight and measurement must also be taken. It is observed that sometimes drawback is availed on weight, but Officers restricts their examination to counting of no of pieces/unit . Here, counting of no of pieces or unit will not give the correct picture of offence regarding wrong availment of export incentive, when the incentive is based on weight, therefore, examination cannot be limited to counting of no of pieces. Especially in RMG/Fabrics weight is also required to be taken at arrive at the GSM of the garment/fabric (gram per square meter). Generally, the garment having lower GSM considered to be of an inferior quality and substandard .

Contents of Panchanama

The facts of examination are recorded under Panchanama drawn before two independent Pancha witnesses to ascertain the truthfulness of Exporter’s declaration. Discrepancies if any, must be recorded in clear and cogent words with regard to above parameters and if export goods found to be prima facie contravening the relevant provisions of Customs law and Allied Acts, then goods become liable to confiscation and accordingly, seizure is effected under panchanama under Section 110(1) of the Customs Act, 1962. After drawl of panchnama, signatures of the both the pancha witnesses are obtained on each and every page of drawn panchnama. Signatures of authorized representatives of exporter that might include CB also, must be secured over panchnama. Section 146A of the Act deals with authorized representative and tells who can be authorized to represent before customs authorities in transaction of customs.

In terms of Section 3 of the Indian Evidence Act, 1872, the contents of panchnama does not per se constitute any evidence in the court of law, panchas who have signed it as witnesses, have to appear in the court of law and corroborate it.

Drawl of Representative Samples

Representative samples are required to be drawn in triplicate and sealed in presence of panchas under customs seal. Signatures of pancha witnesses and exporter’s representative are also required to be obtained over the sealed packages containing representative samples. While sampling requirement of quantity of samples for Lab Analysis must be kept in mind. Representative sealed samples must be forwarded to authorized lab immediately.

Seizure may be Effected After Receipt of Adverse Test Report/M/E Report etc

If prima facie no mis-declaration is found during examination , seizure may not be effected immediately, the seizure can be effected after receipt of adverse lab test report/Market Enquiry report when these enquiries indicate towards any mis-declaration of value, description , classification etc contrary to exporter’s declaration under Section 50(2) of the Customs Act, 1962.

In terms of Board Circular No. 38/2004-Cus., dated 31-5-2004 , it may be noted that whenever goods are seized, detained or confiscated, the custodian of the goods shall be immediately informed by the Customs authority.

Passing of Seizure Memo/Order/etc

In terms of Board’s instruction, No. 1/2017-Cus. Vide F.No. 591/04/2016-Cus. (AS), dated 8-2-2017, whenever goods are being seized, in addition to panchnama, the proper officer must also pass an appropriate order (seizure memo/order/etc) clearly mentioning the reasons to believe that the goods are liable for confiscation.

Not to Deal with Goods in any Manner-

Where it is not practicable to seize any such goods, the proper officer may serve on the owner of the goods an order that he shall not remove, part with, or otherwise deal with the goods except with the previous permission of such officer (first proviso to Section 110(1)) In such cases, investigations should be fast-tracked to expeditiously decide whether to place the goods under seizure or to release the same to their owner. Post seizure, goods are required to be handed over to the Custodian of CFS for safe custody under receipt.

Preventive Officer/Examiner (I.O.) is Proper Officer for Seizure of Goods

Customs Notification No 40/2012(NT) dated 02.05.2012, prescribes the proper officer as Preventive Officer/Examiner (I.O.) for effecting the seizure of goods.

Making of DRI-II

A seizure detection intimation report is prepared which includes details of case such as modus operandi, value involved, duty evasion and the role played by the Officers. This report commonly termed as DRI-II and is sent to ADG/DRI.

Seizure of Goods Perishable in Nature and Disposal thereof

In case of seized goods being perishable or hazardous in nature or is prone to depreciation in value over time or for reasons of constraints in space, in terms of Section 110 (1A) of the Customs Act, 1962 the government can notify these goods and these goods can be disposed off before the conclusion of the proceedings under Section 110(1A).

Example – All electronic goods, Currency, Liquors, P&P medicine, Gold, Silver, Red Sanders, Photographic films, Manmade yarn, Cellular phone, Ball bearings etc.

The guiding Notification 31/1986 dated 05/02/1986 amended from time to time issued under Section 110 also includes seized goods and which can be disposed before the conclusion of the proceedings under Section 110(1A) by the proper officer for which order for provisional release has been passed(Section 110A) but provisional release has not been taken by the concerned person within a period of one month from the date of the communication of such order and the same can be disposed.

Disposal Proceeding is Held Before Magistrate

The above proceeding is held before Magistrate in terms of Section 110(1B). On application of Customs Officer, Magistrate allows the application and proceeding held accordingly which includes taking inventory of goods to be disposed, photographs and drawl of samples and these are certified by the Magistrate. The fact of the proceedings is recorded in panchnama and thereafter goods are disposed. The notice of disposal is also sent to exporter/owner of the goods.

4.4 Provisional Release of Seized Goods

After making of application by exporter, the provisional release of seized goods is permitted pending adjudication by the adjudicating authority in terms of section 110A of Customs Act, 1962 on the execution of surety and security as deemed fit by the competent authority. The provisional release order is communicated to the exporter by the SIIB(X) and also to the concerned Asstt./Dy. Commissioner of Customs, (Docks) under whose jurisdiction the goods are lying. The surety and security is accepted by the Asstt./Dy Commissioner, Docks and goods provisionally allowed to be exported or for Back to Town (BTT) as the case may be. However, the Board Circular No. 30/2013 dated 05.08.2013 carves an exception with regard to provisional release in the instances of prohibited goods defined under Customs Act, 1962 or ITC (HS) Policy.

The legislative intent behind allowing provisional release is that export goods should not be delayed for clearance and unduly held up in docks or CFS for longer period causing congestion in port and loss of export order and thereby loss to vital foreign exchange/ remittance . It is always ensured that provisional release of export goods which are suspected of beingmis-declared or where declaration is to be confirmed by further enquiry/test or goods detained/seized for mis-declaration of quantity/value/description should be permitted on execution of bond and suitable security to cover the redemption fine and penalty. Further, any continued detention of export goods in excess of three days must be brought to the notice of the Commissioner of Customs. (Para 4 of Board Circular No. 1/2011-Customs, dated 4-1-2011).

Distinction Between Provisional Release and Provisional Assessment: Sometimes provisional release is confused with provisional assessment of export goods. In fact, both have different connotations and scopes. Provisional release is applicable for seized goods, documents and things etc. whereas, provisional assessment applies to duty and is resorted to, in case of want of some clarification, further enquiry, chemical or other pending test report. In other words, former is done in the case of suspected mis-declaration of export goods with regard to description, quantity, classification, value etc. whereas, latter is done in the case of inability to self assess by the exporter or for want of some clarification by customs officers or pending test reports etc.

Under provisional assessment by the mandate of statutory arrangements, security as deemed fit by the Proper Officer is provided by the exporter to cover the deficiency of duty, if any arises, after final assessment or re-assessment as the case may be. Further, in case of provisional release security is also furnished by the exporter but to meet the redemption fine and penalty .

In case of provisional release, the assessment remains provisional till the finalization of case by way of adjudication. In other words, in every case of provisional release, there must be a provisional assessment but the converse is not always true, as all cases of provisional assessment do not require provisional release. The provisional release is dependent upon seizure whereas, in cases of provisional assessment, no seizure is required as same is done for the want of document, clarification, pendency of chemical or other test report u/s 18 of Customs Act 1962 .

4.5 Forwarding of samples for Lab Analysis

Legal Backing

Section 144 of the Customs Act, 1962 authorizes Customs officer to take samples of any goods on the entry or clearance of any goods or, at any time before such goods being passed through customs area. The samples are taken in the presence of owner of goods for ascertaining composition or determining value during ongoing investigation and samples can be returned to the owner after desired performance. Quantity of drawl of samples must be ensured so that it meet the criterion of testing .

Procedure of Drawl

Samples are drawn in triplicate and kept in sealed covers and three test memos are prepared. Board Circular No. 43/2017-Cus., dated 16-11-2017 deals with testing of samples by the outside laboratories, when Revenue laboratories are not equipped with testing facility. Samples(RSS) must be sent to such labs which are equipped with the facility of testing of specific goods. In addition to this, another guiding circular is Circular No. 47/2017-Cus. dated 27-11-2017.

Samples to be Tested Immediately

Samples are ensured to be tested immediately after the sampling because delay may result in decay of chemical/physical properties and loss of intrinsic values of the seized/detained goods which may not be in the interest of investigation.

Payment of Charges of Testing to be bear by the Exporter

Often, during investigation , moot question arises who will bear the expenses of testing as in many instances exporter being aggrieved by the detention and investigation decline to pay the charges . In such circ*mstances , as per Section 145 of the Customs Act, 1962, expenses of all the incidental operation has to be incurred by the exporter or owner of the goods.

Relevance of Lab Test Report Given by Chemical Examiner is Considered as Expert Opinion

Expert Opinion – The report of Chemical Examiner is considered as ‘expert’s opinion’. The word, ‘expert’ means a person having or displaying special skill or talent derived from training or experience; one with the special skill or knowledge representing mastery of a particular subject. An expert should show that he has made a special study of the subject or acquired a special experience therein, or in other words that he is skilled and has adequate knowledge of the subject.

It is pertinent to note that the Chemical Examiner has only to give composition of goods and not to comment on the classification of goods . This view was held in Shalimar Paints v. CCE, Calcutta – 2001 (134) E.L.T. 285 (T-Calcutta). It was also observed that Expert opinion is only a relevant piece of evidence and the authorities concerned should decide the correctness of the same by applying their own mind.

On the Similar Line the Opinion of the Cost Accountant is also Considered as an Expert’s Opinion.

In terms of Section 45 of the Evidence Act, 1872, which provides that the opinion of an expert is a relevant fact. Sometimes aid of Cost Accountant/ Chartered Accountant is also taken when value of the export goods is required to be re-determined under Rule 5- Computed Value Method given under Customs Valuation (Determination of Value of Export Goods) Rules, 2007. The Cost Accountant/ Chartered Accountant certify the cost of production, charges towards processing of export goods, charges , if any for design or brand and an amounts towards profit. The Board Circular 37/2007 dated 09.10.2007 says that while applying this rule, due consideration of Cost/Chartered Accountant certificates must be given.

4.6 Determination of Value of Export Goods Under Customs Valuation Rules (CVR), 2007.

It is observed that sometimes export goods are overvalued in order to claim undue export benefit. It is a commonly known fact that unscrupulous elements deliberately overvalued the export goods by manipulation of documents and attempts to get and even many a times succeeded to get undue export benefits. In the instances of declaration of wrong classification/RITC by exporter, customs officer liable to determine correct classification/RITC, as change in description called for re-determination of the value in accordance with Customs Valuation (Determination of Value of Export Goods) Rules 2007.

The said mis-declaration of value renders the goods liable to confiscation under Section 113(i) of the Customs Act, 1962. In such cases actual value of export goods is required to be re-determined so that exporter attempt to avail inadmissible drawback is prevented.

The value of the export goods is determined under Section 14 and section 2(41) of the Customs Act, 1962, read with the Customs Valuation (Determination of Value of Export Goods) Rules 2007.

In the case of suspected overvaluation/over invoicing of export goods, valuation is required to be done by the officers of SIIB(X) by applying the Valuation Rules, 2007 proceeding sequentially.

In the export documents, exporters declare the FOB (Free On Board) Value, CIF(Cost Insurance and Freight) and PMV (Present Market Value) of the export goods. For further clarity FOB, CIF & PMV are defined as follows:

FOB Value (Free on Board) -Seller/Exporter fulfils his obligation to deliver the goods at the named port of shipment. Any further cost of the goods or damage from that point has to bear by the buyer. FOB value of the export goods shall remain the basis for extending the drawback benefit and other export benefit such as MEIS and other chapter 3 benefits of FTP, as the FOB value is recognized as the basis of export transactions both in the EXIM Policy as well as in the Customs Act, 1962. The value has been defined in section 2(41) of the Customs Act,1962 which reads as under;

CIF –(Cost Insurance and Freight)- Means that the seller must pay cost and freight to bring the goods to the named port of destination and additionally he has to pay the marine insurance during carriage of the goods.

PMV (Present Market Value)- The present Market Value linked with definition given under section 2(30) which reads as under “Market price in relation to any goods means the whole sale price of any goods in the ordinary course of trade in India.” It denotes prevailing market price of the goods in normal course of trade in India.

Determination of PMV not the Declared FOB Value

By market enquiry, the declared PMV is re-determined not the declared FOB value as the FOB value is contracted price, which is paid or payable by consignee/overseas buyer, and that cannot be amended, therefore in case of suspected overvaluation of export goods, PMV is re-determined to ascertain the admissibility of drawback and other export incentives. Hence, the exporters should declare the present market value (PMV) of the goods in every case.

Now this gives rise to another question, when the export benefits given by Ministry of Commerce under Chapter 3 of Foreign Trade Policy are dependent upon FOB Value, how can MEIS benefits be restricted by way of re-determination of PMV by Customs authorities , when the two authorities are acting independently and in isolation. Further, when level of co-ordination is not very high.

The answer is that since the Chapter 3 benefits are controlled and disbursed by DGFT so, in case of re-determination of PMV, DGFT authorities are must be kept in loop and intimated time to time by sending copies of Investigation Report/SCN/ Adjudication Order for taking necessary actions as deemed fit.

Applying the Export Valuation Rules Sequentially

It is the general tendency among the Officers of SIIB(X) that they directly go for market survey of the export goods, which is just one of the methods under Rule 6 i.e. Residual method for ascertainment of value of the export goods. Whereas opening words of the said Rule 6 in clear words says that “when value cannot be determined by any of the method discussed above, the same can be determined by Rule 6- Residual method’’ ,it means emphasis is always on applying the Export Valuation Rules sequentially. Therefore, to arrive at Rule 6, rejection of Rule 3, 4 and 5 are necessary beforehand.

Rule 3 of Export Valuation Rules, 2007

Rule 3 talks about declared transaction value and it says that it remains the primary basis of valuation of export goods and method given under Rule 3 will govern vast majority of cases and by acceptance of declared value many of the cases are decided. In simpliciter, Rule 3 lays down emphasis on acceptance of transaction value. The Board Circular 37/2007 dated 09.07.2007 provides guidelines and clarification regarding in respect of Rule 3 of Valuation Rule, 2007. Acceptance of transaction value is, however, subject to the provision of Rule 8 which provides for rejection of declared value for the export goods in certain exceptional cases. This takes us to Rule 4.

Rule 4- Export Value by Comparison Method- Value of export goods can be determined on the basis of value of goods of like kind and quality exported at or about the same time to the other buyers in same destination country. If such data is not available, data respecting another country can be considered for determination of value. In terms of Rule 4(2), while determining the value adjustments regarding different dates of exportation, difference in commercial level, difference in quality, design and composition, difference in freight and insurance charges etc to be considered.

The goods of like kind and quality means having same physical characteristics, quality, performance of the same function and commercially found to be interchangeable as can be produced by same or different persons.

If the value cannot be determined by applying Rule 4, then it will be determined by Rule 5 which is as under.

Rule 5 – Export Value by Computed method- Determination by this rule necessitate to consider cost of production/manufacture or any processing of export goods. Charges incurred towards brands or design and amount towards profit is also considered. While applying this rule, due credence is required to be given to Cost or Chartered Accountant certificate. M.F (DR) Circular no 37/2007-Cus dated 09.10.2007.

Rule 6- Residual method -When value cannot be determined by any of the method discussed above, the same can be determined by Rule 6 i.e. “Residual method” which says that local market price of the goods can one of the way to determine the prices of export goods, but same cannot be only basis for determining the price of the export goods and same shall be consistent with the provisions of general rules of valuation. It talks about market price which is defined in Section 2(30) of the Customs Act,1962 which lays down that, market price in relation to any goods, means the wholesale price of the goods in the ordinary course of trade in India. It clearly indicates that market enquiry is to be conducted in the wholesale market and not in the retail market. The presence of any extraordinary condition/situation such as curfew, shortage of particular goods, tightness of money market will vitiate the market enquiry.

Now the question comes for consideration that when these rules are required to be applied, the answer is when the declared valued under Rule 8 comes for scrutiny for the reason of doubt regarding truth and accuracy, then on reasonable ground the declared value is rejected after following due procedure and applying Valuation Rules sequentially.

SIIB(X) to Conduct Market Enquiry

Vide the mandate of Board Circular 56/2002-Cus dated 09.09.2002, market enquiry is specifically assigned to SIIB(X) of the Custom House and not to the Assessing Officer.

Limitation in Conducting Market Enquiry

The Board Circular 56/2002-Cus dated 09.09. 2002 mandates that market enquiry and final view thereof must be completed in 30 days, however with the permission of Commissioner of Customs , the same may be extended up to 90 days from the date of the S/Bill. If upon enquiry, any discrepancy in respect of value is noticed, the Show Cause Notice(SCN) must be issued within extended period of 90 days . However, subject to satisfaction of the Commissioner of Customs, enquiry may be extended by him from the period of three months till further period as deemed necessary after recording the reasons thereof. The extension can be granted for the reasons of fraud/misstatement/suppression of facts/collusion.

Procedure to be Followed During Market Enquiry (M/E).

(a) Before proceeding for re-determination of Market Value of the export goods, the SIIB officer shall issue a query memo to the exporter specifying reasons for doubt of market value. Rejection of declared value would follow due process of law and needs to speaking order.

(b) Representative samples taken during examination of goods, will be used in M/E.

(c) In presence of authorized representative of Exporter, market survey shall be conducted by the SIIB officer by showing the sample to the vendors in a whole sale market.

(d) With at least three wholesale vendors, market enquiry shall be conducted .

(e) After conducting Market enquiry, a Market Enquiry Report shall be prepared by the SIIB officer( Generally by IO) and the same shall be countersigned by the authorized representative of the exporter as a token of witnessing and agreeing to the arrived market enquiry of the goods.

Precaution to be Exercised During Market Enquiry

Presence of authorized representative of Exporter during market survey shall be ensured. Without giving notice to exporter, conducting market survey has no evidentiary value. The same view was held in M/s Siddachalam Exports Private Ltd V CCE, Delhi (2011). In this decided case by Hon’ble SC, it was observed that extant valuation rules of 1988 must be followed sequentially and in the event on non-observance of said Rules, the case was remanded back to lower authority for fresh adjudication.

Further, during investigation and specifically during recording of statement of exporter/his authorized representative, due care shall be taken and reasons recorded regarding non-application of Rule 4 and 5 and correspondingly there must be admission by the exporter in respect of non-applicability of Rule 4 and 5 in order to arrive at Rule 6.

4.7 Recording of statement u/s 108 of Customs Act,1962

During investigation, collection of evidence is of paramount concern so that exporter/CHA/any other stakeholders or any other person involved in improper exportation of goods shall be penalized and charges leveled against him/her must be substantiated. This object of investigation will never be fulfilled without taking recourse to Section 108 of the Customs Act, 1962. Firstly, summons u/s 108 are send to person at his declared/ known address , whose statement is required to be recorded under the seal and signature of Gazetted Officer. (In SIIB, generally it is recorded before A.O/Superintendent of Customs).

Service of Summons

It may be noted that summons should be specific and clear in its terms as to place, date & time at which person summoned is to attend. Summons are prepared in duplicate and one copy is kept in case file as a proof for purpose of record. A Summons Register is also maintained in the section for the purpose of record.

Summon is send through registered post, or by such courier as approved by Commissioner of Customs . If not served by aforesaid modes then it can be affixed on the Notice Board of the Customs House. Service of summons is controlled by Section 153 of the Customs Act, 1962. Many a times due to incomplete address, summon is returned by the postal authorities with having some postal remark such as “left “or “incomplete address “etc. Hence at the time of sending summons declared/known address of the person whose statement is required to be recorded must be mentioned carefully with pin code otherwise insufficiency of address would make the exercise futile.

When the summons could not be served by usual mode of service as stated above, then sometimes summons are send to other customs formations in duplicate to serve the person who is required to attend, Apart from above modes , no other way is provided in the Customs Act, 1962 for service of summons therefore provisions cab be borrowed from CrPC being a general law which regulates criminal procedure.

Service of Summons under CrPC

As per CrPC, Summons is also personally delivered by the Customs Officers at the declared or known address. When the person who is summoned is not found after due diligence, it can be served to adult male member under his receipt. However, it may be noted that servant cannot be said to be member of the family for service of summons in terms of Section 64 of the Cr PC. Further, service of summons on the mother of accused would not be sufficient compliance.

Section 65 of Cr PC deals with substituted service of summons . This may happen when the person summoned does not reside at his usual residence and no adult male member is available to accept the summons, then duplicate copy of summons is duly affixed on the conspicuous part of the house.

Legal Principle of Section 108

This is a machinery section to gather evidence in case of violations/offence under Customs Act and allied act. The power of recording of statement and calling for documents is vested in Officers not lower than Superintendent and Appraiser (AO in short) in rank. Whoever found involved in violation of customs law and any other allied act , his/ her statement is recorded to gather evidence in order to establish the charges and bring guilty at home. The statement recorded under customs act, is an admissible piece of evidence before the Court of Law.

Section 108A and 108B of the Customs Act, 1962

Who is Authorized to Attend and Nature of Proceedings-

All persons so summoned are either bound to attend personally or through their authorized representative as mentioned in Section 146A of the Customs Act and bounded by the law to tell the truth in connection of any enquiry undertaken by the Officers.

Deemed Judicial Proceeding

This proceeding is deemed to be judicial in nature in terms of Section 193 and 228 of IPC. Persons whose statements are recorded are obliged to tell the truth and furnish correct and true evidence otherwise it will be violative of Section 193 of IPC and he will be liable for punishment in the form of imprisonment. Section 228 of IPC comes into play when there is intentional insult or interruption to Public Servant discharging his judicial functions.

Admissible Piece of Evidence vis-à-vis Confessions Extracted by Police Officers;

It is often said that section 108 is having great significance, which is true in some sense as statement recorded under this section is admissible piece of evidence and admitted by Court of law but cannot prevail general rule of evidence which says that every admissible piece of evidence requires corroboration. The general perception regarding attaching more relevance to statement recorded under Customs Act, vis-à-vis statement recorded by Police Officer under Section 161 of CrPC, in terms of provisions of Section 25 of the Evidence Act. As per vires of Section 25 of the Evidence Act, confessions extracted by Police Officer is an inadmissible piece of evidence, if not made in the immediate presence of a Magistrate under Section 164 of Cr PC.

Collection of evidence through recording of statement of the concerned person is very important and vital for successful investigation. The recorded statements are used as material piece of evidence and based on this and other evidences collected during investigation show cause notices are issued which is considered as initiation of adjudication proceeding by quasi judicial authorities. Adjudicatory functions settles the dispute and results into imposition of penalty and fine, of any . It is a settled law that adjudicating authority cannot travel beyond the show cause notice, therefore, by recording of statement, evidence must be collected carefully which are reliable, independent and trustworthy and admissible even on criminal court during prosecution. Collection of evidence should be of standard degree, with a view that collected evidence can be used in prosecution before court of law.

The attributable reason for section 108 is having greater value as a piece of evidence that it is recorded by Customs Officers , who are unarmed and are in plain cloth and never known for torture or oppression for the purpose of extracting confession whereas in case of police officer it is always not true so idea is that, by rendering such confession inadmissible , the temptation to extort confession by police officer is taken away.

In cases of launching of prosecution against the accused under section 137 of the Customs Act, 1962, however, as a general rule of evidence, statements are also required to be corroborated and proved as any other evidence to bring home the charges.

In case of Superintendent of Customs and Central Excise V R Sunder 1993, Cri L.J 956, the Madras High Court held that Customs Officer is not a Police Officer, therefore statement recorded by Customs officer is admissible in the court of law. The same view was confirmed by Patna High Court in Bansidhar Maharana v State of Bihar.

Corroboration of Statements Recorded u/s 108

The valid presumption regarding the truthfulness and correctness of evidence gathered during recording of statement is raised during prosecution of the case before criminal court of law by taking aid of Section 138B of the Act and statement becomes material piece of evidence.

Section 138B of the Customs Act, 1962 reads as under;

138B. Relevancy of statements under certain circ*mstances.—

(1)A statement made and signed by a person before any gazetted officer of customs during the course of any inquiry or proceeding under this Act shall be relevant, for the purpose of proving, in any prosecution for an offence under this Act, the truth of the facts which it contains,—

(a)when the person who made the statement is dead or cannot be found, or is incapable of giving evidence, or is kept out of the way by the adverse party, or whose presence cannot be obtained without an amount of delay or expense which, under the circ*mstances of the case, the court considers unreasonable; or

(b)when the person who made the statement is examined as a witness in the case before the court and the court is of opinion that, having regard to the circ*mstances of the case, the statement should be admitted in evidence in the interests of justice.

(2)The provisions of sub-section (1) shall so far as may be apply in relation to any proceeding under this Act, other than a proceeding before a court, as they apply in relation to a proceeding before a court.

Reading of the section revealed the material value of statement recorded before the gazetted officer and its admissibility.

In Gopalji Heavy Lifters Versus Commissioner of Customs (Import), Mumbai, 2017 (357) E.L.T. 537 (Tri. – Mumbai) the CESTAT, West Zonal Bench, Mumbai, it was held that the statements recorded under Section 108 of Customs Act, 1962, purportedly admitting to undervaluation, has, apparently, elicited the prevailing price and also essayed the manner in which the additional consideration has been routed to suppliers. These are valuable inputs acquire sanctity only in the tempering heat of challenge and survival. Credibility is accorded only in cross-examination which, though demanded by appellant at the adjudication stage, was refused on the ground that there was no need to do so. Undoubtedly , the Indian Evidence Act, 1872 has been interpreted to accord evidentiary value to statements recorded by officers of Customs in contradiction to that recorded before police officers. That, however, is no claim to infallibility or imposition in the absence of corroboration. That the law deigns to allow introduction of a statement in proceedings does not whittle down the requirement to prove the contents in the deposition. Section 138B of Customs Act, 1962 mandates that each statement be proved in the proceedings. Having failed to do so, reliance on the statements is bereft of legal validity. A conclusion arrived at from invalidated statements suffers the stigma of invalidity.

Article 20(3) of the Constitution Prohibits Self- incrimination

In view of the provisions of Article 20(3) of the Constitution, Customs Officers cannot compel the accused to tender self incriminating evidence during recording of statement. Therefore, at the beginning of recording of statement accused is warned and informed that this statement can be used in any proceedings. Therefore, the statement should be voluntary in nature. Statement recorded by coercion, threat would make the evidence tainted and inadmissible.

Retracted Statements

It is observed by the SC that retracted statements requires independent corroboration in material particulars. The rule of evidence requires that it should be corroborated by independent evidence before arriving at any truth. It has to weighed in view of circ*mstances and whole evidence, it cannot be summarily rejected. Therefore, statements and retracted statements are both required to be corroborated. Making retracted statements after amount of substantial delay, reduced the probative force of evidence as it is understood that after deliberation and afterthought, the statement was retracted and thus it takes away nature of free will under which it is given.

In the case of Vinod Solanki Versus Union of India 2009 (233) E.L.T. 157 (S.C.), it was held by the Supreme Court of India that mere retraction of confession not sufficient to make confessional statement irrelevant for the purpose of a proceeding in a criminal or a quasi-criminal case but there cannot be any doubt whatsoever that the court is obligated to take into consideration the pros and cons of both the confession and retraction made by the accused. In case of criteria to ascertain voluntary nature of statement subsequently retracted , and in terms of Sections 24 and 106 of Indian Evidence Act, 1872 the Court must bear in mind the attending circ*mstances, time of retraction, nature and manner of retraction and other relevant factors to arrive at a finding on voluntary nature of statement or otherwise of a confession which has been retracted .

Defiance of Summons

Many a times, the person who is summoned deliberately disobey the summons and not join the investigation by concealing himself/herself, thus delay the investigation by adopting dilatory tactics, which makes the customs authority to file criminal complaint before Magistrate and Court issues firstly summons, then bailable warrant and lastly non-baliable warrant under CrPC for compelling his appearance. Disobedience of summons lead to issuance of bailable warrant and subsequently non-baliable warrant . In this regard order passed by the Hon’ble Delhi H.C in the case of Sanjay Kumar Bhartiya Versus DRI reported in 2016 (334) E.L.T. 588 (Del.), can be relied .

In absence of no express mechanism under Customs Act, for disobedience of summons and less acquaintance with the provisions of CrPC and IPC, generally the officers are not very keen to take the help of criminal court to compel the person summoned to attend the proceeding under section 108 of the Customs Act,1962. Non-attendance and non-production of documents by the summoned person before the customs officer is contempt of lawful authority, hence it is an offence under Section 174 and 175 of IPC, 1860 . Remedial action is to file a complaint under Section 200 of CrPC before magistrate court with the help of lawyer, Summons , bailable warrant and non-baliable warrant issued by the Court either served by the Police Officer or by Customs Officer with the assistance of police officer. Generally after disobedience of three summons recourse of criminal court is taken.

4.8 Address Verification of the Exporter’s Declared IEC address ;

Under Section 7 of the Foreign Trade (Development and Regulation) Act, 1992, IEC is granted to the exporter/importer for some specific given address. As per requirement of law, exporter must have a definite address, wherefrom he can conduct his business. It is also necessary in the sense that during investigation he/she may be required so he can be traced/located, apprehended and must be compel to join the investigation, so that the dispute comes to logical end.

Sometimes exporters effect the export of goods without any valid IEC address in clandestine manner, thereby contravening the provisions of Foreign Trade (Development and Regulation) Act 1992 and the rules made thereunder. The exporter deliberately by misstating their address fraudulently obtains the IEC by given fake/bogus address in order to conceal their identity. The sole intention is to defraud the Government exchequer with an aim to avail inadmissible incentives so that when cases are booked against them, investigating agencies cannot lay hand over him..

IEC Verification is Conducted by Examiner/Preventive Officer (I.O)

In view of the above, verification of the exporter’s declared IEC address is essential ingredient of investigation and often done by the SIIB(X). IEC verification is conducted by Examiner/Preventive Officer (I.O) and they submit a Verification Report by visiting the declared IEC address. As an evidence, Officer must collect proof of address, such as ration card, electricity bill, telephone bill, copy of passport, or sale/rent agreement of the premise etc.

Request is Made to Outstation Customs Formations to Conduct Address Verification of Exporter’s Declared IEC Address –

When the declared IEC address of the exporter falls beyond the jurisdiction of customs formation wherein case has been booked, address verification of the exporter’s IEC address is made through outstation and other customs formations.

Further, under the provisions of Custom Act, 1962, definition of the exporter’s has been laid under Section 2(20),which is as under;

“Exporter in relation to any goods at any time between their entry for export and the time when they are exported, includes any owner, beneficial person or any person holding himself out to be exporter.”

Though, the said definition is at variance with the definition given under Foreign Trade(Development and Regulation) Act,1992 which has linked the definition with the possession of IEC code .That is to say possession of IEC code is a condition precedent. The possession of IEC no but without IEC address, makes the IEC nullity in the eye of the law and common parlance, it is called as bogus or fake IEC.

Obligation of Customs Broker to Verify the Declared IEC Address of the Exporter

Under Regulation 10(n) of Customs Broker Licensing Regulation 2018, the Customs Broker is saddled with responsibility to verify the IEC address of the exporter. In case of Customs Broker fails to verify the IEC address and acts on the fake IEC address and took the clearance work without proper verification, he violates the said regulation by not complying with the said provisions and thus aids and abets the fraudulent exports. Such acts may lead to suspension of license by the Licensing Authority(Commissioner of Customs) on the basis of Offence Report and recommendation thereto. Accordingly, the investigating authority shall furnish its report to the Commissioner of Customs who had issued the CHA(now CB) license within thirty days of the detection of an offence in terms of Board Circular No. 9/2010-Cus., dated 8-4-2010

4.9 Search under Section 105 of the Customs Act, 1962

Object- The object of this Section is to make a search for the goods liable to be confiscated or recovery of documents secreted in any place which are relevant to any proceedings under the Customs Act. When such goods, things and documents could not be produced by the person summoned or enquiry taken against him by requisition under the authority of Section 107 or 108, action under Section 105 is initiated.

Under Section 105 of the Customs Act, 1962, if the Asstt/Deputy Commissioner of Customs has reasonable believe that some incriminating goods, document , things etc are secreted in any place and are liable for confiscation, he may authorize any officers of Customs to search the place . Asstt/Deputy Commissioner of Customs issues search warrant under his seal and signature and name of the officers are mentioned in it. Search Register is maintained in the section and search warrant is serially numbered.

Content of the Search Warrant – Following will be the content of the search warrant ;

The premises to be searched ;
The name of the authorized officer(s) ;
The name of issuing officer with full designation;
The date and place of issue;
Serial no of the search warrant

Procedure for search –During search proceedings, search panchnama is drawn generally by IO in the presence of two independent panchas. Following procedures are also adopted;

The person of the authorized officials and witnesses may be offered for search before initiating the search so as to avoid suspicion that any member has surreptitiously planted the things recovered in the search;
The officers of customs must call upon two or more witnesses, who are respectable inhabitant of the locality , wherein premise is situated .
The list of all the things recovered during search must be inventorized wherefrom they are recovered and must be signed by the witnesses,.
The copy of list prepared and signed by the witnesses must be given to the owner of premise or his/ her representative.

Liable to Confiscation

During search, only those goods, documents, things etc which are incriminating in nature and are liable to confiscation under Section 113 would be seized under Section 110 of the Customs Act, 1962.

Emergence of Some Tricky Situations During Search

When the premise is locked– In absence of any provisions of customs act , provisions of Cr PC is applied and in terms of Section 47(2) of CRPC , the Officers are permitted to break open such locked premise and enter into premises to effect arrest of the person.

In Case of Woman Does not Appear in Public –(As per her customs)- A notice must be given by the Officers for withdrawal of such woman during search.

Vitiation of Search – In the case of Wazir Chand v State of H.P, AIR, 1954,S.C 415 it was held by the Supreme Court that search was illegal as it was without authority of law.

Evidence obtained in illegal search – Evidence which is otherwise relevant does not become irrelevant as the search was invalid or without any authority of law. This view was held in the case of Barindara Kumar Ghose v Emperor ILR 37 Cal 467. In another case of State of Maharashtra v Natwarlal Damodar Das Soni, the Hon’ble S.C has held that even if the search was illegal , it will not vitiate seizure of articles, subsequent investigation and trial and conviction.

Whether Name of the Person Whose Premises is to be Searched is Required to Mention on the Search Warrant– Reading of the section 105(1) does not indicates any such requirement. Particulars of premises are required to be mentioned on search warrant, this view was held in Anshuman Lath v Deputy Superintendent of Central Excise , Calcutta 71,C.W.N 814.

Search Team must Consists of Lady Officer

In terms of provisions Section 100(3) of CrPC, lady officer should search if the person to be searched is woman with strict regard to decency.

Premises to be Searched Falling Beyond the Jurisdiction-

Request to be made to competent Customs authorities of concerned jurisdiction wherein premises is situated for issuance of search warrant. If the Asstt/Deputy Commissioner of customs wherein export has taken place issues the search warrant for premises falling beyond his jurisdiction it will be ultra vires as he is lacking in jurisdiction. Notification issued under Section 4 may be referred for this purpose.

Retrieval of Incriminating Electronic Data During Search and the Application of Section 138C of the Customs Act.

Section 138C is pari materia with Section 65B of the Evidence Act, 1872. In this modern era and with the implementation of “Ease of Doing Business” emphasis is on paperless transaction, which provides greater significance to Section 138C of the Customs Act, 1962. Nowadays, the exporter/importer stores all the relevant import/export data in electronic form. Such electronic record containing information are deemed to be a document and becomes admissible in any proceedings in terms of Section 65A and 65B of the Evidence Act, 1872 without further proof or production of the original. Section 65B deals with the admissibility of the electronic record. The purpose of these provisions is to sanctify secondary evidence in electronic form, generated by a computer.

In S.N. Agrotech Versus Commissioner of Customs, New Delhi 2018 (361) E.L.T. 761 (Tri. – Del.) Section 138C came for scrutiny. The CESTAT, Principal Bench, New Delhi has observed the following ;

On close reading of Section 138C of the Act, 1962, it is seen that the Legislature had prescribed the detailed procedure to accept the computer printouts and other electronic devices as evidences. It has been stated that any proceedings under the Customs Act, 1962, where it is desired to give a statement in evidence of electronic devices, shall be evidences of any matter stated in the certificate. In the present case, we find that the provisions of Section 138C of the Act were not complied with to use the computer printouts as evidence. The Ld. Counsel for the appellants submitted that there is a gross illegality committed during the retrieval of the electronic documents. It appears from the Panchnama and record of proceedings that the alleged date recovered from electronic documents, so seized, were copied in a hard disk in presence of one person and, thereafter, it was opened in front of other persons. It is noted that the certificate was not prepared during the seizure of the electronic devices, as required under the law. The investigation is normally started after collecting the intelligence/information from various sources. The investigating officers are procuring the evidences in the nature of documents, statements, etc., to establish the truth. During the evolution of technology, the electronic devices were used as evidence. In this context, the law is framed to follow the procedure, while using the electronic devices as evidence for authenticity of the documents, which would be examined by the adjudicating authority during adjudication proceeding. In the instant case, it is found that the entire case proceeded on the basis of the electronic documents as evidence. But the investigating officers had not taken pain to comply with the provisions of the law to establish the truthfulness of the documents and merely proceeded on the basis of the statements. Hence, the evidence of electronic devices, as relied upon by the adjudicating authority cannot be accepted.

In the case of Anvar P.V. (supra), while dealing with Section 65B of the Evidence Act, 1872 (Pari materia to Section 138C of the Act, 1962), The Hon’ble Supreme Court observed as under

“We note that the Section 138C of the Customs Act is pari materia to Section 65B of the Evidence Act. Consequently, the evidence in the form of computer printouts, etc., recovered during the course of investigation can be admitted as in the present proceedings only subject to the satisfaction of the sub-section (2) of Section 138C. This refers to the certificate from a responsible person in relation to the operation of the relevant laptop/computer. After perusing the record of the case, we note that in respect of the electronic documents in the form of computer printouts from the seized laptops and other electronic devices have not been accompanied by a certificate as required by Section 138C(2) as above. In the absence of such certificate, in view of the unambiguous language in the judgment of the Hon’ble Supreme Court (supra), the said electronic documents cannot be relied upon by the Revenue for confirmation of differential duty on the appellant. In the present case, the main evidence on which, Revenue has sought to establish the case of undervaluation and mis-declaration of the imported goods is in the form of the computer printouts taken out from the laptops and other electronic devices seized from the residential premises of Shri Nikhil Asrani, Director in respect of which the requirement of Section 138C(2) has not been satisfied. On this ground, the impugned order suffers from uncurable error and hence, is liable to be set aside.

4.10 Arrest under Section 104 of the Customs Act, 1962

According to Article 21 of the Constitution “no person shall be deprived of his liberty of his life or personal liberty except according to the procedure established by law.” This implies that a person can be deprived of his life or personal liberty if the derivation brought in accordance with the established procedure of law. It means apprehension of person by legal authority resulting in deprivation of his liberty must be in accordance with established procedure of law.

Under Criminal law, Arrest is of two types : (i) With Warrant and (ii) Without Warrant

However under Customs Law arrest is effected without warrant . Arrest of a person involved in fraudulent export of goods might be necessary under following circ*mstances;

For securing attendance of an accused in a trial ;
As a preventive or precautionary measure;
To prevent tampering of evidence and influencing witnesses;

Arrest of the person under Section 104 of the Customs Act, 1962 is effected for the violation of Section 132, 133, 134, 135, 135A and 136 of the Customs Act, 1962.

Section 136 is applicable for departmental officers, when offence is alleged to have been committed by them.

How to Effect Arrest

Intelligence Officers (Inspectors/Examiners) are the proper officer, who arrest a person accused of contravening the provisions of customs law under section 104 of the Customs Act, 1962 read with Section 132, 133, 134, 135 , 135A and 136 of the Customs Act, 1962. Arrest is effected through Memo of Arrest. After arrest, the person is allowed to talk to his friend/ relative/family/advocate and details of communication is mentioned on the Arrest Memo.

The threshold monetary limit has been prescribed by Board Circular 28/2015 dated 23 . 10.2015 read with Board Circular 38 /2013 dated 17.09.2013, for making arrest. In export cases, following guidelines has been issued by Board Circular 28/2015 dated 23.10.2015 in Para 2(d) which reads as under;

“Fraudulent availment of drawback or attempt to avail of drawback or any exemption from duty provided under the Customs Act, 1962, if the amount of drawback or exemption from duty is Rs. 1,00,00,000/- (Rupees One Crore) or more. In cases related to exportation of trade goods (i.e. appraising cases) involving (i) willful mis-declaration in value/description; (ii) concealment of restricted goods or goods notified under section 11 of the Customs Act, 1962, where FOB value of the offending goods is Rs. 1,00,00,000/- (Rupees One Crore) or more.”

However, the above value limit would not applied in cases involving offences relating to FICN, arms, ammunitions and explosives, antiques, art treasures, wild life items and endangered species of flora and fauna. In such case, arrest, if required, on the basis of facts and circ*mstances of the case, may be considered irrespective of value of offending goods involved.

Essential Ingredients of Section 104

(i) The Officer should be empowered by general or special order of the Commissioner of Customs;

(ii) The Officer should have reason to believe;

(iii) The reason of believe should be related to guilt of offence;

(iv) The Officer will inform the person concerned the ground of arrest;

(v) The arrested person will be taken to nearest magistrate without unnecessary delay or within 24 hours of his arrest

Explaining some words used in Section 104 of the Customs Act, 1962.

As per Section 104 of the Customs Act, offences are categorized into two categories cognizable and non-cognizable. These words are not defined under customs act, therefore definition from CrPC may be borrowed for better understanding .

Cognizable and Non-Cognizable offences are not defined in Customs Act but in CrPC. As per CrPC cognizable offence means where Police officer may arrest without a warrant and investigate into it, whereas in non-cognizable offences a police officer has no authority to arrest without a warrant and initiate investigation into it. Non-cognizable offences are therefore less serious and trivial than cognizable offences. Seriousness of the offence depends upon the maximum punishment prescribed for it. By and large offences which are punishable for not less than three years are taken as serious offences and are made cognizable.

Bailable and Non-bailable Offence.

In CrPC, bailable and non-bailable offences are defined under Section 2(a)

Bailable offence is an offence which is shown as bailable in the first schedule to the Code or which is made bailable by any other law for the time being in force. In the case of bailable offence, bail is granted as a matter of right on execution of surety and/or bond. (Section 436 of CrPC). In Bailable offence bail is given by AC/DC, as the customs officer exercise the power of police officer.

All the remaining offences are non-bailable offences wherein bail is secured from Court. The CrPC does not have any fixed rule for classification of bailable and non-bailable offences. Generally speaking bailable offences are less serious and less grave. The yardstick applied for classification of bailable and non-bailable offences is that bailable offence wherein maximum punishment prescribed is less than three years. In the case of maximum punishment prescribed is exceeding three years, it will be non-bailable offence.

Conjoint reading of bailable, non-bailable offences and cognizable/non-cognizable offences indicate that generally cognizable offences are non-bailable and non-cognizable offence is bailable .

Applying these explanation in Customs Act, it can be concluded that in view of maximum punishment prescribed for 7 years under section 135(1)(i), offence under Section 135 is would be cognizable and non- bailable.

In D.K. Basu v. State of W.B.” reported as 1997 (1) SCC 416, guidelines of arrest has laid down by the Apex Court, which must be followed by investigating agency.

4.11 Enquiry of CDR (Call Data Records)

Calling of CDR of the Persons Involved in Fraudulent Export of Goods– In today’s world ,digital surveillance has assume significance and it is used in vast majority of cases to curb the menace of crimes including fraudulent exports. Though SIIB(X) does not have facility of tracking the cellular or other phones, but often CDR of the person (s) involved is called for analysis and investigation.

This became essential when the case pertains to fraudulent export of prohibited goods/restricted goods. In today’s era without assistance of technology, collection of evidence is difficult so as to prove the guilt. Therefore, when the case is of serious nature viz export of prohibited/restricted goods or for that matter the evidence is not forthcoming then investigating agency may call for the call data records in order to link the sequence of events of offence to prove the contravention. Enquiry can be made to telecom operators through Nodal Officer appointed in the Customs House.

4.12 Enquiry of e-mail id Used in the Fraudulent Transaction of Export Goods

Enquiry made from Cyber Cell of Police to verify the genuineness of email id used in the fraudulent transaction of smuggling activities is also done by the SIIB(X). Email id is used for exchanging message between alleged persons involved in smuggling. This gives lead and clue about the offender, his whereabouts, therefore verification of email id to trace the culprit is necessary.

Further, scrutiny of mail also gives us idea regarding actual negotiated price between buyer( consignee) and seller(exporter/consignor) in case of investigation of over-invoicing.

4.13 Seizure/Freezing of Bank Accounts- Investigating Agencies as a measure to prevent transaction of the undue export benefits or illegal proceeds into the exporter’s account or some related person account also freezes the bank account during investigation. SIIB(X) issues letter to the concerned bank for freezing of the account.

But since the bank accounts does not fall under definition of goods, and seizure of only goods, documents and things etc are effected under Section 110 of the Customs Act, 1962, therefore various courts/tribunal have held that seizure/freezing of bank accounts as illegal. Therefore, before initiating such act caution must be exercised

Some important case laws are as under;

In M. Z. Handicrafts Versus Union of India, the High Court of Allahabad 2015 (322) E.L.T. 57 (All.) in Writ (C) No. 17424 of 2015, decided on 7-5-2015 that Bank account cannot be freezed pending investigation under Section 110 of Customs Act, 1962 and it does not enable Customs Officer to attach a bank account as bank account is not akin to ‘currency’ to be called as goods. Hence no question of provisional release under Bond and Revenue was directed to de-freeze accounts of the petitioner immediately.

In Lal Mahal Ltd. versus U.O.I in W.P. (C) No. 12251 of 2016 & C.M. Appl. No. 48317 of 2016, decided on 16-3-2017, the Delhi High Court has observed that during investigation by DRI , direction to banks to cease all banking activities of bank accounts of petitioner is without authority of law. No show cause notice to petitioner prior to issuance of letters to bank, which was also silent about law under which powers were exercised by DRI for directing banks. It was also held that Department did not produce any order to show that proper officer has formed any opinion that bank accounts were liable to be confiscated or useful for or relevant to any proceedings and consequently required to be seized . It was not sufficient to only state that investigation was being carried out against petitioner therefore bank account was required to be seized Allegation that gold imported by petitioner, which was liable to be confiscated was not available and its sale proceeds may be in bank accounts of petitioner, did not indicate reasonable belief of DRI officers . Department did not refute stand of petitioner that seized bank accounts were cash credit accounts. In that view, there was no justification in freezing cash credit accounts of petitioner, and more so as they offered to give security of property over and above seized gold and currency .

4.14 Enquiry of Vehicle and Seizure thereof – Vehicle is defined under Section 2(42) and falls under the definition of conveyance given under Section 2(9) of the Customs Act, 1962. Vehicles are used for the transportation of goods, therefore in some cases, to trace the origin , owner of the goods and other relevant details , enquiry in respect of vehicle is done through RTO. After calling the details, owner is interrogated/enquired for collection of evidence. When the vehicle is found to be used in smuggling activities with the knowledge of owner, the vehicle is also confiscated under section 115 of the customs act. Reading of the section 115(2) reveals that burden lies on the shoulder of owner of the vehicle to prove that the vehicle was not used in the smuggling of export goods . At JNCH, SIIB(X) also obtains details of driver from CISF authorities for the vehicle which enters into port terminal carrying the goods stuffed into containers. At the time of entrance into port terminal, details of drivers are submitted to CISF authorities.

4.15 Enquiry Through Banks– Exporter for the purpose of receipt of remittance and drawback and other export incentive open an account in the bank. When details are not forthcoming through other tools of investigation, details of the exporter can be obtained from concerned bank. It also helps the investigating authority to reach to the exporter, through the person who has introduced him and helped him in opening the Bank A/C, when he tries to conceal himself.

4.16 Enquiry Through COIN- Overseas enquiry regarding trade based money laundering and commercial fraud is made by DRI through COIN (Customs Overseas Intelligence Network). Customs Officers, (of IRS rank) are posted at Dubai, Hongkong , London, New York , Singapore, Brussels, Kathmandu and Moscow . Therefore, if any overseas enquiry is required to me made by the Officers of SIIB(X), that may be referred to COIN Unit but must be routed through DRI. It may be noted that territorial jurisdiction of Customs Act, 1962 has also been extended beyond outside India for causing investigation to any offence or contravention committed outside India by any person by amendment of Finance Act 2018 w.e.f. 29 .03.2018 under Section 1 of the Customs Act, 1962.

In this regard, provisions under Section 151B inserted vide Finance Act 2018 w.e.f. 29 .03.2018 regarding reciprocal arrangement for exchange of information for facilitating trade, enforcing provisions of this Act etc may also be referred. It creates a binding force on the contracting state to provide information related to investigation under their corresponding law.

4.17 Issuance of Show Cause Notice (SCN) under Section 124 or 28/28AAA of the Customs Act, 1962.

Object of the Notice- Under Section 124 and 28 of the Act, object is to give person affected a reasonable opportunity to meet charges and afford hearing so that he can defend himself. It must be remembered charges are leveled by SCN and till the case is decided it remains only allegation.

Essential Ingredients of the Notice

(i) It must contain grounds for taking action for confiscation of goods and imposition of penalty. (SCN with distinct charges)

(ii) It provides for giving of an opportunity of making a representation against the grounds mentioned in the notice.(Reply of the Noticee)

(iii) It provides for giving of an opportunity to the noticee of being heard in the matter.(Personal Hearing)

These requirements are the embodiments of principal of natural justice so that he can be given full opportunity to controvert the charges.

In SIIB(X), under Customs Act, Show Cause Notice (SCN) is issued after completion of investigation within stipulated period of time. In limine, it is relevant to mention that SCN are issued proposing confiscation of goods and penalty on any person under section 124 of the Customs Act, 1962.

SCN Issued Under Section 28

SCN is also issued under section 28 of the Customs Act for the duty not levied or not paid or short levied or short paid or erroneously refunded. Imported goods under export promotion schemes such as EPCG, DEEC etc are cleared under zero rate of duty or concessional rate of duty . When the exporter failed to fulfill his obligation , duty which was exempted due to any export promotion scheme become recoverable under Section 28 of the Customs Act, 1962.

Section 28 is also applicable when the export goods attracts duty. In following situation, usually demands of Customs duties are issued under the vires of Section 28 of the Act.

(a) Goods cleared under export promotion scheme and exporter failed to fulfill export obligation,

(b) Export goods is leviable to duty,

In addition to Section 124 and Section 28 , SCN is also issued under Section 28AAA of the Customs Act, 1962.

Difference Between SCN u/s 124 and Section 28

Section 124 of the Customs Act, 1962 is enforced when goods are available for seizure and liable to confiscation and called for imposition of redemption fine and penalty. Whereas Section 28 operates in the cases of escape of duty deliberately or inadvertently. In the case of Section 28 , since goods are not available for seizure , therefore redemption fine is not imposed and proceeding is limited to imposition of penalty.

Section 28AAA- Duty liability of person, who had obtained authorization or scrip by misstatement or suppression or collusion –

This is a new provision became operational w.e.f 28.05.2012. Before 28.05.2012, in the case of involvement of scrips obtained by fraud , first Notice has to be given to exporter , then after cancellation of scrips by DGFT , another notice was required to be issued to importer for demand of duty forgone. The entire process used to take considerable amount of time.

Now with the introduction of Section 28AAA , the duty against the scrips can be demanded either from the exporter or from person to whom the license has been transferred .

The condition existing for application of this section must be of misstatement or suppression of facts or collusion .In other words conditions are similar to fraud. What it follows that this section is operational only in cases of fraud .

Second condition is that demand of duty can only be raised against the utilization of instrument (authorization, scrip, or license or certificate etc issued under FTDR Act, 1992 bestowing financial or fiscal benefits issued under reward scheme, remission or under any incentive scheme.

Now it is clear that recovery can be made from the person(transferee) to whom the scrips has been transferred by the exporter or by the exporter . The transferee may clear the goods without payment of customs duty on the strength of such instrument. If the demand has been confirmed on the importer ( who is transferee) under section 28 of the Act, the demand of recovery cannot be made from the transferor(exporter) as per Section 28AAA(4). The recovery can be made either from the transferor( Exporter) or from transferee( Importer) and not from both to obviate double jeopardy .

SCN/ Written Representation May be Oral on the Request of Person Concerned–

It has been held by the various courts that receipt of SCN is a personal right however, persons concerned can waive the requirement of written SCN in terms of proviso of Section 124 and make a request to the Adjudicating Authority for waiver of SCN. But bare reading of first proviso of the Section 124 revealed that it leaves to the Adjudicating Authority to decide whether notice and representation can be oral. The use of word “may” in the proviso clearly indicates that it is not mandatory for the Adjudicating Authority to accept the request of the person concerned for an oral notice or representation. The legislative intention behind is to obviate undue delay and difficulty not only to the department but to the person concerned.

However, when there is involvement of complicated issue and stakes of revenue is very high, it is prudent to issue written SCN.

Notice to be issued under Limitation period – Section 124 does not prescribe any period of limitation, however this Section is invoked for confiscation of goods and for imposition of penalty ,however confiscation is subject to seizure of goods provided under section 110 of the Customs Act. Section 110 of the Customs Act occurs in Chapter XIII of the Act, which relates to seizure of goods, documents and things etc. Section 110 provides that if the officer has reason to believe that any goods are liable for confiscation , he may seize the goods . Section 110(2) enables the Department to keep the seized goods for period of six months. But if the department could not give notice under Section 110(1) under the prescribed period or extended period of six months, Department is bound to return the goods to the person from whose possession the goods were seized. It follows, therefore that within period of six months or one year, as the case may be, no notice is given as contemplated under section 124(a) , the goods shall be returned to the person from whose possession they were taken. The power to retain the goods is no longer available after the period had expired However, there is no connection between exercise of power of confiscation of goods and imposition of penalty under Section 124 and seizure of goods under section 110 of the Act. Section 110 put limit on power of retention of goods, however it does not affect proceedings of confiscation and penalty under section 124 of the Act.

Now it is appropriate to examine the issue of limitation from constitutional point of view. It is settled law that right to property is a constitutional right guaranteed under Article 300A, therefore, investigating authorities cannot keep the seized goods in their custody for indefinite period. Keeping in view, this constitutional right, Section 110(2) controlled the Section 124 of the Act and Department has to issue SCN in prescribed period of six months or permitted extended period of another six months allowed by Commissioner/ Principal Commissioner of Customs. In case of failing to issue SCN in six months goods has to be returned to owner/exporter of the goods unconditionally. The said period can be permitted to be extended by Commissioner of Customs by another six months on reasonable grounds. Procedure of extension, involves issuance of SCN by Commissioner and completes with issuance of O-in-O which appears to be very cumbersome. This entails issuance of SCN for extension of time period , personal hearing to the extent that noticee do not have objection in extension of time period and passing of order. Therefore, issuance of SCN may not be unnecessarily delayed and it is exhorted to complete the investigation in six months time.

However, in terms of amendment brought by Finance Act 2018, when the seized goods are provisionally released under Section 110A , the specified period of six months shall not apply.

Drafting of Show Cause Notice- Drafting of good quality Show Cause Notice is a must for the Officers of SIIB(X). Investigation culminates into show cause notice and exporter is penalized by way of confiscation and imposition of penalty, which depends upon drafting of good quality Show Cause Notice. SCN must enumerate in detail the offence, legal provisions which have been contravened, consequence of contraventions and most important charging paragraph.

In short ,following aspects must be must be kept in mind while drafting a show cause notice,

the legal provisions which have been contravened and offence thereof-
consequences of such contravention of each of the legal provisions;
person to be charged in the SCN and finally,
draft Charging Paragraph of the SCN.
Legal provisions which have been Contravened– All the legal provisions of customs law which have been contravened including the provisions of allied act, may be spelt out in cogent and clear words.

For Example – In case of overvaluation of export goods presented under drawback scheme, and mis-declaration detected thereof , following Section will be attracted, apart from other relevant provisions, if any

Section 50 of the Customs Act,
Section 14 and section 2(41) of the Customs Act, 1962,
Customs Valuation (Determination of Value of Export Goods) Rules 2007.
Rule 11 of the Foreign Trade ( Regulations),1993
Consequence- The contravention of aforementioned provisions would result in confiscation of goods under section 113(i) and 113(ia) of the Customs Act imposition of penalty u/s 114(iii) of the Customs Act.
Section 113(i) and 113(ia) of the Customs Act,
Section 114(iii) of the Customs Act,

(a)Person to be charged in the SCN

This is a moot question whom to be charged as it is needed to be find out whether the entity is proprietorship firm or partnership or a company. It is an admitted fact that under provisions of Customs law and allied Acts, business (import/export) are transacted mostly through firms/companies after obtaining of IEC under the provisions of FTP. Here becomes vital to understand provisions of company law in order to enforce the liabilities arises during the operation of customs law and initiate recovery proceedings.

(b)A Company is a Distinct Legal Person

A company on the other hand is a distinct legal person. It is born on the day of incorporation when Registrar of the Companies issue certificate of incorporation. In company, liabilities and properties are of company. Further, company can be sued and sue by his own name. Members/Directors of the company have limited liability. Director can only be prosecuted, if they were in charge of affairs of the company at the time of commission of offence, therefore tax dues can be recovered from the liquidation of assets of company and not from the Director of the company. This view was held in Hrishikesh Panda v State of Orissa 1996(83)ELT504(Ori)(HC). In this regard, relevant section under Customs Act, 1962 is Section 140, which deals with the offence of the companies. In the said section company includes body incorporate and also includes a firm or other association of individuals.

Proprietary concern or Partnership firm

In case of proprietary concern or partnership firm, it is cogent that they do not have a separate legal existence. Liabilities of proprietor or partners are unlimited. Specially in the case of proprietary concern liabilities would be either of proprietor or firm.

Similarly for a partnership firm, liabilities of the firm is unlimited and partner who is controlling the affairs of the firm and was in charge of the firm is liable in the case of commission of offence.

Divergent View of Law Courts Regarding Imposition of Penalty in case of Partnership Firm

In this regard, reliance can be placed on the decision of Hon’ble Gujarat High Court in the case of Pravin N. Shah (supra) wherein it was observed that once the firm is penalized, separate penalty is not imposable upon partner of firm because partner is not a separate legal entity and cannot be equated with employee of the firm.

In another case, of Mytri Enterprises v. Commissioner – 2016 (336) E.L.T. A35 (S.C.) it was held by the Apex Court that the simultaneous penalty could be imposed upon the firm and its partners. However, as the penalty was imposed on both the partners, no further penalty was imposable on the firm. In view of the above decisions, it is clear that penalty could not be imposed on both partners and firm simultaneously.

(c)Draft Charging Paragraph of the SCN – Example -If the case is of simple overvaluation of export goods and other declarations are correct.

Draft Charging Paragraph of the SCN must contains following among other things;

Clauses for re- determination of FOB/PMV value,
Rejection and restriction of claimed drawback and other export incentive benefits , as they depend on value,
Provisions of confiscation of goods- Section 113(i) and 113(ia) of the Customs Act
Section for imposition of penal liability -Section 114(iii) of the Customs Act, 1962.

(d)Authority to Issue Notice-

Reading of the language of Section 124 clearly states that Notice cannot be issued by the officer of customs not below the rank of Assistant Commissioner, it is suggestive of the fact that minimum requirement of the statute is that Notice must be issued by Assistant Commissioner. It creates a situation when Adjudicating Authority and authority to issue Notice may be of different rank. In other words, Notice issued by Assistant Commissioner wherein Adjudicating Authority is Commissioner may not be bad in law. The reason is that adjudication of case requires higher application of mind therefore case is required to be adjudicated by proper officer prescribed by Board Circular 24/2011 dated 31.05.2011. In practice, generally speaking, issuance of Notice and passing of adjudication order is done by same level of officer.

Wrong mention of rule and regulation will not vitiate the proceedings of show cause notice. However, clerical or arithmetical mistake in any decision even in SCN can be corrected through corrigendum.

CORIGENDUM

In the Customs Act, Section 154 lays down that clerical or arithmetical mistake in any decision(It includes SCN also) or order passed by the Central Government, the Board or any officer of customs under this Act, or errors arising therein from accidental slip or omission may, at any time, be corrected by such officers. What is permissible, therefore, is to correct clerical or arithmetical error in a decision or an error arising from accidental slip in such decisions. It does not at all permit any substantial change in the order or decision be brought about by a corrigendum. By the corrigendum, new grounds or charges cannot be pressed, it will be seen as new show cause notice and limitation will be counted from fresh notice. If earlier notice did not indicate amount of duty demanded and it is demanded through corrigendum, it will be considered as a fresh notice. This view was affirmed in CCE v Kasturi Foods and Chemicals Ltd -1992(59) ELT 68(CEGAT)

(e)Serving of Show Cause Notice

Service of SCN has to made as per provisions of Section 153 of the Customs Act. Modes of service of notice, order has been dealt by this section. Regarding service of SCN , Section 27 of General Clauses Act may also be referred.

SELF TEST QUIZ on Investigation & Issuance of SCN etc.

Q 1 Which section of customs act, mandates that exporters have to bear cost towards labour , presentation of the goods for examination and testing of samples etc,

(i)Section 145,

(ii)Section 140,

(iii)Section 144

(iv)Section 51

Q 2 Export goods can detained by the Intelligence Agencies ?

(i)Prior to LEO

(ii)Post LEO

(iii)Both

(iv)None of the above

Q3. Definition of “examination” has been given under which Section?

(i) Section 2(17)

(ii) Section 2(18)

(iii) 2(20)

(iv) None of the above

Q.4. Who is proper officer for seizure of goods in terms of Customs Notification No 40/2012 (NT) dated 02.05.2012 ?

(i) PO

(ii) EO

(iii) Both

(iv) None of the above

Q.5 Under which provisions ,the value of the export goods is determined ?

(i) Section 14

(ii) Section 2(41) of the Customs Act, 1962,

(iii) Customs Valuation (Determination of Value of Export Goods) Rules 2007.

(iv)All of the above

(v)None of the above

Q.6 Market Enquiry is conducted in terms of under which Rule of Customs Valuation (Determination of Value of Export Goods) Rules 2007 ?

(i) Rule 3

(ii) Rule 4

(iii)Rule 5

(iv)Rule 6

Q.7 While applying rule 4, due credence is required to be given to Cost or Chartered Accountant certificate is mandated by which Board Circular ?

(i) Board Circular no 37/2007-Cus dated 09.10.2007.

(ii) Board Circular no 56/2002 dated 09.09.2002

(iii) Both

(iv) None of the above.

Q.8 Under which provisions, Customs Officers cannot compel the accused to tender self incriminating evidence during recording of statement ?

(i) Article 20(3) of the Constitution,

(ii) Article 22 of Constitution,

(iii) Section 108 of the Customs Act,

(iv) Section 193 of IPC

Q.9 Disobedience of summons issued under Section 108 is an offence

(i) under civil law,

(ii) criminal law

(iii) both

(iv) None of the above.

Q.9a. As per Board Circular 28/2015 dated 23 .10.2015 of in cases fraudulent availment of drawback or attempt to avail of drawback or any exemption from duty provided under the Customs Act, 1962, what is the amount of drawback or exemption from duty is provided for arrest of a person ?

(i) Rs. 1,00,00,000/- (Rupees One Crore) or more.

(ii)Rs 50 lakhs

(iii) 1.5 Crore

(iv)None of the above

Q.10 Under which provisions of Customs Act, 1962, maximum imprisonment is provided up to 7 years ?

(i) Section 132,

(ii) Section 133,

(iii) Section 135

(iv) None of the above

Q.11 Overseas enquiry from COIN can be done through which agency ?

(i) DRI,

(ii) CBI,

(iii) ED

(iv) None of the above

Q.12. Under the Customs Act, authority to rectify clerical or arithmetical mistake in any decision or order passed by the Central Government, the Board or any officer of customs or errors arising therein from accidental slip or omission may, at any time is derived from which section ?

(i) Section 145

(ii) Section 154

(iii) Section 124

(iv) Section 50

Q13 When the goods are seized and not provisionally released, time period of issuance of Show Cause Notice under Section 124 is ?

(i) Six months

(ii)Twelve months

(iii)No time limit

(iv)Five years

Ans – 1(i), 2(i), & (ii), 3(i), 4(iii), 5 (iv), 6(iv), 7(i), 8(i), 9(i), 9a(i), 10(iii), 11(i), 12(ii), 13(i) & (ii)

Chapter 5- Role of Officers Deployed in SIIB (X)

One of the object of the customs act is to enforce the provisions of the customs Act so that evasion of duty and undue availment of export incentives can be minimized. This needs an efficient investigation to check the export fraud. For investigative work suitable manpower/staff strength is required to meet the challenges and for tackling nuances of , otherwise it will not yield desired result. As per posting policy, efficient officers are handpicked and deployed for the investigative work. Accordingly, the following officers are posted at SIIB(X) to deal with the cases of fraudulent exports and other assignments related thereto. Day to day work are discharged by these following officers.

5.1 Role of AC/DC

AC/DC being the head of the Section, basically he has a supervisory role to perform concerning investigation. He monitors the day to day progress of investigative work and looks after administrative work also. Mainly following works are performed by him.

He supervises the routine work of intelligence and investigation performed by the officers of SIIB(X).
The SIO/IOs discusses the issues related to the investigation with AC/DC and who in turn provides the necessary guidelines. As the investigation is a time bound affair, AC/DC keeps the track of it and issues and provides necessary insights and inputs to expedite the investigation.
He used to monitor other functions of SIIB (x) relating to RTI, CPGRAMS, MTR and other see that reply is given in stipulated time frame. Miscellaneous correspondences and replies related to investigation and administrative matter are also dealt by him with the assistance of SIO/IO.
AC/DC play crucial role in coordinating with cross formation agencies involved into investigations.
He also work as the bridge between the superior officers such as Commissioner and Chief Commissioner and the ground level staff of Investigation.
Many a times AC/DC are in direct receipt of intelligence and information and their roles get even more important. By applying presence of mind, pragmatism and analysis of issue at their level, AC/DC are responsible for advising suitable course of action to the officer of SIIB (X) whom they intend to entrust SIO/IO role in the matter.
Distribution of work and assignments, precisely assignment of file is decided by the AC/DC for the most part. His decision in distribution of investigation assumes significance in so far as it has bearing on the desired conclusion of investigation.
Affidavits before court of law have to be signed by AC/DC and normally they are authorized by Commissioner for such work, so in the court proceeding too, the AC/DC plays a pivotal role.
Secret service fund, meant for gathering intelligence, developing informers’ network and related expenses in analyzing the intelligence & investigation is under direct discretion of AC/DC. Only they are responsible for optimal utilization of the fund .
Under Section 105 of Customs Act, AC/DC issue the search warrants and he authorizes, SIO/IO to cause search of the named premises.
Placing of alert and subsequent removal of the alerts after the conclusion of the investigation is entrusted with AC/DC, although in certain cases securing Commissioner’s approval is warranted.
All the communication and correspondences relating to investigation, such as detention of consignment, placing export benefit on hold, etc and administrative works such as statistics & report making, are generally effected through AC/DC.

In nutshell AC/DC is captain of the team of SIIB(X), and under his supervision and guidance, investigation is carried out from gathering of intelligence/ information to drafting of Show Cause Notice . Further, from the detention of export consignments , seizure, provisional release ,collection of evidence by various tools of investigation to conclusion of investigation etc ,he is always found to be playing a pivotal role and remain a important cog of the wheel of investigation. Progress of investigation hugely depends upon him , so he is require to be apprised , updated almost on daily basis by SIOs/IOs. In turn he apprised the senior officers time to time as the investigation warrants.

5.2 Role of Superintendent/Appraising Officer: These officers are known as the Senior Intelligence Officers (SIO) in SIIB (X). They are saddled with crucial responsibility of investigation starting from gathering of intelligence to concluding an investigation by way of drafting of SCN. Their work chiefly involves following aspects:

Gathering intelligence from various sources.
Investigating fraudulent export cases.
Conducting searches and causing seizure of incriminating evidences during searches.
Monitoring of search, seizure and arrest effected by IOs.
Issuing Summons to the concerned persons involved and recording of statements thereof.
Coordinating with various agencies.
Drafting of SCN within prescribed time limit.
Making of para-wise comments respecting Writ Petitions and cross objections for filing before Appellate Tribunals.
Drafting of Alert Circulars/Modus operandi Circulars
Mentoring of the Sub-ordinate officers.

Essentially, any investigation starts from gathering intelligence and filtering the information to make it actionable on the ground. This is bit of tricky stuff and involves having balanced perspective and warrants some true dedication for the job. It is an art to meticulously ensure that the information in all likelihoods only leads to fruition. Based on any information received as such from an informant one must not resort to the steps that hampers legitimate trade. The work of intelligence is assuming more significance in the backdrop of several world trade agreements in place along with domestic policy too, on ease of doing business which essentially mandates judicious approach in withholding any consignment.

On that note, processing, analyzing and filtering the information gathered is itself a huge task and requires considerable experience on the part of Investigative Officers. The job well warrants deployment of the ones who have put in rigorous efforts in their past on similar assignments. The SIOs are best fit with crucial role to play in the investigation for, their serving in the department for an extended period of time as Superintendents. Additionally, the prerequisite of making the gathered intelligence an actionable game plan involves cultivating the information at expense of officer’s resources inter-alia, individual mental faculties. Information cultivation might include developing a network of informers by keeping oneself in their loop of trust and reciprocally maintaining their anonymity on officer’s part.

On the face, looking simple, gathering information, turning it into executable game plan and finally leading the way into logical end of investigation involves lot of grit, a balanced approach and wide experience of course. The SIOs are supposed to be an epitome of all this attributes and are backbone of SIIB(X).

The SIOs are responsible for receiving case files marked directly from AC/DC and sometimes even from authorities higher than AC/DC. After receipt of such files by SIO investigation commences with the assistance of IOs. During course of investigation, SIOs are also responsible for gathering additional intelligence and information and then making use of information so received in taking the investigation to the next level.

During course of investigation, SIO issues summons under section 108 of Customs Act 1962 and records statement of the concerned person in order to collect the evidence to bring the investigation to logical end. On the part of SIOs, it is desirable that they keep a questionnaire handy in place, before they commence recording of statement. The desirability finds reasoned on two counts, first it is in the interest of investigation where questionnaire helps extract most relevant information. And second, it is on the policy line of ease of doing business, whereby dwell time for any interaction is desired to be brought to minimum. In absence of such questionnaire, it would be pretty difficult to frame all the revenant questions instantly and recording of statement may remain incomplete and this will result into summoning of exporter multiple times.

SIOs also play vital role in search, seizure and arrest of the persons suspected to be involved as they provide valuable inputs to the enquiries caused by IOs such as seeking call data records, conducting address verification of declared IEC. As the investigations under Customs law are time bound, SIO plays a significant role in drafting of SCN which is culmination of investigation process.

Since, SIOs devote considerably long period in serving the department they get to acquire rich and varied experience of the departmental work. This has a tremendous bearing on shaping the working know-how of their subordinate IOs. In fact, the SIOs by sharing their knowledge and experience with IOs do the necessary mentoring needed for fresh entrants and cause value addition in crucial assignments such as investigation into fraudulent cases of export.

Although, the ground work of investigation is effected by IOS, the SIO are key functionary of entire investigation and they are for the most part most responsible officer. In almost every bit of investigation chore undertaken, SIOs have to do at least the supervision work. For instance, Market enquiry of export goods mostly caused by IOs but are supervised by SIOs. Instances have been noticed that IOs being new entrant go to retail market for market survey, whereas the same is require to conducted in wholesale market.

5.3 Role of Preventive Officer/Examining Officer:

These officers are known as “Intelligence Officer” in SIIB (X). Their basic role is to assist the Senior Intelligence Officers(SIOs) for investigation of various fraudulent exports coming under purview of SIIB(X). All the rudimentary work of investigation and many crucial functions are performed by IOs. Works performed by them are as follows;

In any investigation agency, search, seizure and arrest are very fundamental and very important which are performed by
They are also entrusted with the role of gathering information from various sources some of them, they themselves cultivate, others are referred to them by SIOs. Scanning through systems figure out patterns of exports and making out the anomalies also form the part of their work.
IOs are primary level officers who undertake the physical examination of export goods. Subsequent to physical examination they draw Panchanama and hence play the role of Panchanama officers. The Panchanama is a vital document for conducting onward investigation as it is a statement of facts drawn in presence of independent panch witnesses. Post examination of export goods, if the goods are found contravening the provisions of Customs act and allied acts, they are seized under section 110 by the IOs.
Sending the Representative Samples to relevant labs and ensuring receipt of analysis reports from the institutionalized labs also form the part IOs job.
Arrest under Section 104 is also caused by them after obtaining due permission from competent authority ( Under General or special order of Commissioner of Customs). IOs have got important roles in producing the arrested persons before criminal courts under sound medical condition within 24 hours of arrest
Search is also undertaken by them, and seizure of incriminating documents and things are also effected by IOs of SIIB(X).
Apart from this, Market Survey of export goods are done by the IOs in most of the cases. This assumes importance as overvaluation of export goods are one of the most known modus operandi as export incentives are concomitant upon re-determined value.
Verification of address declared under IEC is done by IOs, this helps in differentiating the bogus / fake exporters from the legitimate ones.
Any relevant enquiry that aids to investigation is also made by them and residual assignment deemed essential for shaping the investigation and assigned by superior authorities are also undertaken by IOs.

5.4 Tax Assistant / Senior Tax Assistant:

SIIB(X) deals with lots of important correspondences from inside /outside of the dedicated cell. The Tax Assistant posted in SIIB(X) play important aide in receiving and dispatching the communication. Maintenance of various registers is looked after by them. Movement of the case files to Superior officers and other sections are also taken care of by the Tax Assistants.

Timely service of SCNs, Orders, decisions, Summons or any other Notices which are controlled by Section 153 of Customs Act, 1962 are also done by them.

To ensure the compliance on part of the SIIB(X), Tax Assistants play important roles as they are the ones who make sure that the said communications are delivered within timeline under prescribed modes of dispatch.

5.5 Sepoy / Hawaldar:

Sepoys and Hawaldars assume importance on many occasions which requires more of manual assistance.

They cause dispatch and delivery of the files and correspondence with desired care. Be it movement of files from one authority to another or the movement of secret / confidential letters from /to SIIB(X).

They are instrumental during physical examination of the detained export goods in preparing inventory of the same. Sepoys/Hawaldars help taking out the representative samples, sealing the samples under Customs seals and sending them to be kept under safe custody of SIIB(X).

Chapter -6:Modus Operandi Detected by SIIB (x)

During the course of investigation, instances of misuse of export scheme by unscrupulous exporters have been noticed which relates to overvaluation of export goods, mis-declaration of description ,declaration of wrong drawback heading , wrong availment of brand rate/AIR, mis-declaration of weight, mis-declaration of RITC to avail undue export benefits and wrong availment of export incentives given by DGFT etc.

Prohibited/Restricted goods were also found to be exported on fake export documents , by complete mis- declaration of description, by replacement of cargo etc.

The following examples/instances of fraudulent/illegal export should be noted while working in SIIB(X) , to prevent such fraud in future :

6.1 Over Valuation of Export Goods

Instances have come to the notice that cases of overvaluation of export goods have increased. Exporters have been found over-invoicing of the export goods, to claim inadmissible export benefits. It was also observed that declared value of the goods in the export documents are not in commensuration with the actual value of the goods. Overvaluation of export goods not only results into claim and accrual of ineligible export benefits in the form of drawback but also result in claim of inadmissible and ineligible claim of chapter 3 benefits of FTP i.e. MEIS etc.( Earlier FPS, FMS, VKGUY etc). In a few instances, it has come to notice that claim of Chapter 3 benefits of FTP, was many times than the admissible amount of drawback for the goods attempted to be exported. It is pertinent to mention that for few commodities chapter 3 benefits such as MEIS is as high as 7% which is many times more than drawback benefits after implementation of GST laws.

Inflating the value of the export goods or not mentioning true sale consideration of the goods would amount to violation of the conditions for import and export and it not only dents the Government exchequer but also results in illegal transaction of money. It is settled law that over- invoicing of the goods for exportation is an offence under the Custom Act, 1962 and by not complying with the conditions of export , export goods were rendered prohibited goods and held for liable to confiscation under section 113(d) of the Customs Act, 1962 by Apex Court in case of Om Prakash Bhatia v CC(2003) 6 SCC 161=2003 AIR SCW 3452,

By over-valuation of export goods exporters attempt to export sub-standard and inferior quality of export goods and claims undue exports benefits,. Fake IECs/ dummy IECs are used by fly by night operators to avail undue export benefits as they operates the dummy IECs (Exporter found to be non-existent at the declared address) for a limited period of time, till the disbursal of undue drawback in their bank account . Generally in all such cases, exporter concealed and remain untraceable as forged documents are used for obtaining IEC and bank accounts, so it becomes difficult to trace him.

Items Prone to Overvaluation

For detecting and booking of cases, the Officers of SIIB(X) should look for some commodity/items which are prone to overvaluation and mis-declaration, first and foremost on the list is Ready Made garments and Fabric. In such cases value of export goods is highly inflated to claim undue export benefits.

Other item which is prone to mis-declaration is carpet , as there are various types of carpets are being exported, made of silk, cotton, polyester etc for which process of manufacturing are also different as some are handmade, some are machine made therefore the price of this item varies a lot . Considering this aspect, there is always a huge chance of mis-declaration of value.

Chemical is also prone to mis-declartion of description and value thereof as in many cases it was seen that in guise of declared item of chemical of having high value, sometimes lime , chalk powder are illegally exported which result in accrual of undue export benefits

6.2. Wrong Availment of MEIS Benefits

Wrong availment of MEIS benefits has also been in vogue and is on rise, since coming into force of GST and subsequent reduction of rate of drawback . The exporter files S/Bill claiming very nominal amount of drawback generally in few thousands rupees or almost nil drawback or export under Free S/Bill. But in such cases value of export goods are highly inflated and having higher rate of MEIS benefits is available as per Appendix 3B of the Handbook of Procedure under FTP 2015-20. Since the amount of drawback claim is very less or almost nil or goods under free S/Bill , therefore sometimes undue MEIS claim on inflated value, escapes the vigilant eyes of customs authorities and as a result exporter succeeded in his/her attempt of claiming undue and impermissible benefits.

6.2.1 Mis-classification of CTH to Avail Higher Rate of MEIS

(i) Instances have come to notice that export items having description as “Odhanies , Scarves and Dupattas are classifiable under CTH 6117 if knitted or crocheted and under CTH 6214 if not knitted or crocheted. However, exporter in many cases of export of Odhanies and Dupattas misclassified the goods under ITC(HS)/CTH 63079020 and 63079090 as against the correct ITC(HS) under CTH 6117 for knitted or crocheted and under CTH 6214 if not knitted or crocheted, with an intention to avail undue MEIS benefits. Such mis-classification are deliberate on the part of the exporter to avail 3% extra MEIS benefits. This is so because MEIS under CTH 6117 is 4% and under CTH 6307 is 7%. In this regard, Alert Circular No 20/2019 dated 17.01.2019 vide F.No S/2-PCAO-128/2018-19 JNCH(A1) has been issued by JNCH .

(ii) In the case of one exporter, the goods namely “Pillow Case, Sheet Sets, Fitted Sheets , Cushions Covers , Duvet Covers, Bedskirts etc were classified by the exporters under ITC(HS)/CTH 6307 9020 & 6307 9090 as against correct ITC(HC)/CTH 6304 with intention to wrongly avail higher rate of MEIS benefit. The goods were classifiable under CTH 6304 , however the exporter had deliberately mis –classified the goods under ITC(HS)/ CTH 6307. This was done to avail 3% extra MEIS benefits . The quantum of such undue benefit was Rs 73 Crores(Approx). JNCH has also issued Alert Circular No 15/2018 dated 17.02.2019 vide F. No S/2-PCAO-128/2018-19 JNCH(A1) to sensitize the staff.

6.3 Splitting of S/Bills

Another modus operandi is to split the S/Bills to make it fall within lower examination norms. In terms of Board Circular 06/2002 dated 23.01.2002, examining officers are alerted regarding splitting of S/Bill. The said Circular lays down that “wherever on the same day the same exporter attempts to export a consignment (other than free shipping bills) involving export incentive of Rs. 1 lakh or less (Drawback/DEPB) or in other cases having the FOB value upto Rs. 5 lakh to the same country, the system would alert the examining officer that this is second shipment of the same exporter. The examining officer can then decide whether to subject the second consignment for examination or not. In case the buyer in both or more consignments happens to be the same person, subsequent consignments should be examined”.

Therefore, SIIB has to keep check and ensured that exporters do not split up consignments so as to fall within the lower examination norms.

Commodities/ Item Wise Modus Operandi Adopted by Offenders

6.4 Fabric

6.4.1 Mis-declaration of Composition of Fabric

A tendency to mis-classify fabrics as “other woven fabrics of synthetic staple fibres consisting of more than 85% of synthetic staple fibers” under DBK Head 551502 (dyed), has been observed. In case of mixed manmade fabrics i.e. where predominant percentage of fabric is polyester, the tendency is to classify the fabric under DBK Head 551502, which is for synthetic staple fiber, containing 85% or more by weight with a drawback rate of 2.2 % with the cap of Rs. 13.3/-per Kg. However, in most of the cases where the synthetic staple fiber is less than 85% and the balance is artificial fiber like viscose etc., it should be classified under DBK Head 551506 (dyed), with drawback rate of 2 % with the cap of Rs.13/- per Kg.

Exporters often declare the composition of the fabrics wrongly to claim higher drawback benefits. For example cotton fabric is mis-declared as polyester fabric. Officers should verify the composition by visual inspection and/or by subjecting the fabric to chemical test .

Often in case of fabric, the UQC is often wrongly mentioned as ‘Meter’, whereas the correct UQC for fabric is ‘Sq. Meter’

6.4.2 Mis-declaration of Weight of Fabric

The net weight of the fabrics does not include the paperboard/cardboard used to wrap the fabric. In a detected case of consignment of fabric revealed that the cardboard used to wrap the fabric consists of 40% of weight resulting in shortage of 40% of net weight of the fabric. The same modus operandi may be adopted by some other exporters of fabric also. Therefore, weighment of the consignment of fabric may be done with and/or without cardboard .

6.5. Cotton Twine Ropes

Recently SIIB (Export) JNCH detected a case of highly overvalued goods of cotton twine ropes declared at Rs. 95/- per yard which works out to be Rs 42,000/- per Kg , whereas prevailing market rates were around Rs 117-147 per Kg. During preliminary investigation it was noticed that around 400 shipments had been effected in the past by the said exporter amounting to FOB value of Rs 381 Cr. In the instant case, only MEIS benefit availed by the exporter was about 15 Crore. What is to be noted that the shipping bills were free shipping bills.

It is commonly perceived fact that Free Shipping bills are not given much attention during assessment and examination, as it is assumed that it does not put financial burden on the department except where goods fall under restricted or prohibited categories. However, it should be kept in mind that the exporter is entitled for other incentives such as MEIS etc.

6.6. Export of Co-axial Cable

In the case of export of co-axial cable under 14 shipping bills through JNPT, SIIB(X) booked a case wherein export goods were declared at Rs 775/- per yard, where the PMV was around Rs 15-20/- per yard. This resulted into estimated revenue loss of around 92 lakhs which includes DBK and MEIS.

6.7. Export of Truss Nuts/Adjusting Nuts

In a case of export of Truss nuts/adjusting nuts, booked by SIIB(X), JNCH value was declared at Rs.3800/- per KG whereas the same were found to be sold in market at around 100-120/- per kg. Estimated loss to exchequer was around 10 lakhs.

6.8. Carpet

It has been noticed that in many cases of carpets, the exporter mis-declares the composition of carpets as well as type of carpet.

For example; woven carpet declared as knotted, machine made declared as hand made, carpet made of natural fibers (cotton, hemp, jute etc.), in order to avail higher export incentive.

6.8.1 Mis-declaration of Quantity of Carpet

In one of the case booked by SIIB(X), JNCH, some exporter had been found to declare more than the actual area, (calculated on the basis of declared dimensions), resulting in higher claim of drawback. Length and breadth of the carpet was declared correctly but total declared area almost found doubled. It was also found the UQC declared as sq. feet instead of correct UQC sq. metre.

6.8.2 Mis-declaration of Machine made Carpets

Instances have come to notice, that some exporters had been found to declare machine-made carpets as hand-made for wrongly claiming FPS benefits as Hand-made carpets attracted FPS benefits under FTP.

6.8.3 Over- valuation of Carpet

In cases of carpets , value is also found to be highly mis-declared which resulted in wrong availment of drawback and MEIS benefits. Some indicative values for woolen carpets are as under :

Type of carpet Price (Per Square Metre)

Knotted USD 50-120

Woven USD 40-80

Tufted USD 20-50

6.8.4 Mis- Classification of RITC /DBK heading of Polypropylene Mats or floor covering

Polypropylene Mats or floor covering are classifiable under 3918 found to be wrongly classified under chapter 57. If there are plaits in Polypropylene Mats or floor covering same are classifiable in Chapter 46.

7. Garments

7.1 Mis-declaration of Quantity

It has also been noticed that number of garments in one carton were found to be correctly declared, however ,total no. of garments in the packing list/shipping bill were declared to be more than actual no. of garments containing in all the cartons.

7.2 Mis-declaration of Babies Garments as Girls Dress/Ladies Dress

A number of detected cases of garments revealed that exporters had declared the goods as girls or ladies dress even if they were meant for babies . As per rule of classification , the garments and clothing accessories means for young children of a body height not exceeding 86 cm should be classified as Babies Garments. (Chapter Note No. 6 of Chapter 61). In many cases booked by SIIB(X) , JNCH the goods were mis-declared in description and found as babies garments instead of declared girls woven dress. The rate of drawback was same but cap was less for babies garment.

7.3 Mis-declaration of garments without Jacket as Suit

Suit means both jacket and trousers and it should be of same material. It is noticed that garments without jacket are found to declared as suit in many cases.

7.4 Mis-declaration of Ladies Dress/Ensembles

Ladies dresses/ensembles composed of the same fabric material are classifiable under DBK head 620403/ 620404, with higher cap value, when the upper and lower pieces of a set are made of different materials, they should not be classified as ensembles and such ladies dresses i.e. kurta and salwar made of different fabrics, should be classified under DBK head 621105.

It may also be noted under CTH 6105 and 6106, garments with pockets below the waist, with a ribbed waist-band or other means of tightening at the bottom of the garment can not be defined as blouse/shirts. (Chapter Note no. 4 of Chapter 61).

7.5 Scarves

Chapter Note No. 7 of Chapter 62 of Customs Tariff should be kept in view while classifying scarves. It has been noticed that pieces of sarees are hemmed at the borders and presented for export as scarves.

8. Mis- classification under DBK heading 940401

Pillows and quilts filled with polypropylene / polyfill are correctly classifiable under DBK head 940401. However, instances has come to notice that exporter are mis-classifying pillows and quilts etc filled with cotton under 940401, wherein drawback is 2.8% with a cap value of Rs 32/unit. These items should be correctly classified under DBK head 940499 (others) wherein drawback is available at the rate of 1.5%.

Mattress supports, articles of bedding and similar furnishing (for example mattresses, quilts, cushions and pillows) stuffed with any material are required to be classified under drawback sl. No. 9404 and not in chapter 63.

9 . Brass Item

In case of exports of brass, it was observed that cartons/boxes were containing rocks, newspapers etc. instead of declared brass items resulting in outright smuggling which can be detected purely on proper examination of packages at random basis or on the basis of information.

Brass items of general nature such as lugs/door nobs door hinges etc are declared as artefacts for claiming of undue higher amount of drawback .

Copper/brass tubes and pipe are found to be wrongly declared as copper/brass pipe fittings in order to claim undue drawback benefit .

Recently it was noticed that in brass consignment, attempt was made to export Glass marbles/glasses, in place of brass to adjust the weight to get the undue benefit and same were stacked rear side of the lot to escape from examination.

It has been noticed that some exporters mention correct description of the items, but mention wrong drawback serial no. to avail undue higher drawback. Example – In one case even though the exporter had declared the items to be electric meter parts made of brass, which is specifically classifiable at Sl. No. 9028 of Drawback Schedule, the exporter wrongly claimed the drawback under Sl No. 853802.

10. Wrong Classification of Hair pins, Curling pins, Curling grips

Items like hair pins, curling pins, curling grips were often wrongly classified as ‘Imitation Jewellery’, under CTH head 7117, wherein MEIS are available at the rate of 7%, however, the same are correctly classifiable under CTH 9615, wherein MEIS is at the rate of 3%. This was done to claim undue MEIS benefits of 4%

11. Stainless Steel

Wash basins of stainless steel were mis-classified by exporters under CTH 73239990 (other items of steel), as kitchen utensils, wherein MEIS benefits are admissible at 5%. However, there is a specific entry for sanitary ware (wash basins) of steel classifiable under CTH 73241000 , wherein MEIS is admissible at the rate of 3%.

Indicative price of some metals in Mumbai Market ( Only for reference )

Brass article		Price (Per Kg in Rs)	Remarks
Brass Nails		Rs 700-800/-
Brass builders hardware hinges		Rs 800-1000/-	For glass fittings it would be Rs 900/-

Brass artware /artifacts /handicrafts		Depends on work done from Rs 900-2000	Mostly artistic value
Steel Utensil	Rs 300-500/-		value may be high if more nickel content
Iron	Rs 100-250		Depends upon manufacturing process

12. CHEMICALS

12.1 Submission of Fake ISO Certificates

It has been noticed that Merchant exporters had submitted fake ISO Certificate/documents of manufacturers to avoid sampling. When enquiry was done it was found such company was non est. In some cases, it was found that manufacturer was in existence but they were not producing such chemicals and hence not issued any certificate. Drawl of samples during examination would have checked the fraud .

12.2 Mis-declaration of Description of Chemical

It has been found that the exporters have declared the goods as chemicals e. g. Ampicillin Sodium Sterile, Ferro Vanadium, etc. in their consignment. After subjecting the goods for chemical testing, the goods were found to be Fertilizers which are prohibited for export.

Further, in a recent case of Uric Acid, the chemical after testing found to be simple Lime (Chunna powder)/ POP.

13. Leather Item

It is found that exporter by way of mis-declaration exporting unfinished leather in the guise of finished leather. Unfinished Leather is restricted as per export policy.

14. SCOMET ITEM

Export of Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) listed items under ‘Appendix 3’ to Schedule- 2 of ITC (HS) Classifications of Export and Import Items, should be permitted only against an export licence issued in this behalf if export is prohibited or is permitted without licence subject to fulfillment of conditions, if any, as indicated under/against any specific category or item.

15. Violation of Conditions of EPCG

In a case investigated by SIIB(X), JNCH it was observed that representative of CHA(CB) fraudulently made addition of “ Made Ups” under RITC 63071090 in the copy of condition sheet of EPCG license, along with the other export goods, with an intention that added goods might get EPCG benefit. During investigation the declared value for said item was not counted towards fulfillment of export obligation against the EPCG license. Therefore, exporter who was third party was denied the said export benefit.

16. RED SANDERS

Following modus operandi are noticed in various cases of illegal export of Red Sanders:

16.1 Forged Documents

Forged & fake shipping bill, having number of genuine shipping bill, for which LEO has been granted a day or two earlier were used for taking container inside port. Containers cleared from ICDs and stuffed with Red Sanders were railed / wheeled in on the basis of fake / forged shipping bills and same were found not reflected in the ICEGATE.

The export documents mainly factory stuffed Shipping Bills found to be filed through Service Centre by unscrupulous elements for exporting the contraband goods by misusing the IECs/CHAs codes of genuine exporters/CHAs, by presenting fake documents such as KYC documents/Central Excise factory stuffing examination reports and fake seals, without the knowledge of the concerned authorities.

16.2 Replacement of Cargo

Another modus operandi noticed is that the goods were stuffed under supervision of Central Excise officers and exporter, however, the same were replaced with contraband during transit of the shipment by the transporter between the factory / ICD to JNPT by opening the doors of the container by removing the clamps / front and rear casting of the door latches. The same were found re-fixed after replacing the genuine cargo with the contraband, with help of industrial adhesive or welding. In these cases, the foreign buyers had arranged for the transportation of the said stuffed container from factory / ICD to JNPT and during investigation, the said transporter was found absconding and not traceable.

16.3 Mis-use of IEC / CHA Code of genuine exporter / CHA

In some cases it has been noticed that the shipping bills for exporting the contraband goods had been filed by misusing the IECs / CHA Codes of unsuspecting exporters / CHAs. These shipping bills were found to have been filed in the EDI system on the basis of forged CHA passes and authority letters in the name of known and reliable exporters.

To keep a tab on such fraudulent exports, all the stake holders like CHAs and Importers/ Exporters were advised to adhere to the Public Notice No. 15/2012 dtd. 9.2.2012 which requires that all the importers/exporters and CHAs must visit the ICEGATE website (www.icegate.gov.in) daily and check the summary of bills of entry/shipping bills filed by them/ in their name from ‘IEC wise summary report’ and ‘CHA wise summary report’ menu available on the website, respectively. The said public notice also required the importers / exporters / CHA to convey the details of the bills of entry or the shipping bills which were not filed by them, but were shown against their name in the said summary reports immediately to the office of the concerned Commissioner of Customs, JNCH, to facilitate the department in initiating suitable action in respect of such documents filed by unscrupulous elements.

17. Misuse of Brand Rate and All Industry Rate of Drawback

JNCH has issued a modus operandi circular dated 04.05.2018 , wherein it was stated that highly overvalued goods such as carpets, garments of silk, wool etc were being exported by filing S/Bills under Brand Rate of drawback and mentioning the identifier as 9801/9807 . Identifier is required to be declared under Brand Rate and Special Brand Rate. As the export is covered under Brand Rate to avoid thorough examination as immediate benefit was not availed by the exporter . Declared goods were having higher rate of drawback and higher cap also Later exporter revert to AIR once the goods are exported.

18. Fraud Under GST

After the implementation of GST, export is zero rated supply u/s 16 of IGST Act. It means that export does not attract any tax & clearances for export are to be made under Letter of Undertaking. However, if clearances for export are made on payment of IGST, the amount of IGST is refundable.

W.e.f. 01-07-2017, in the case of export, exporter has to prepare GST invoice, wherein it is to be mentioned that supply of goods are meant for export. By 10^th of the subsequent month, the exporter has to file GSTR-1 Return & the details of sales invoices to be uploaded in the GSTR-1 Return. In the case of export on payment of IGST, after filing the Shipping Bill details against the concerned invoice no., refund for the said payment is processed. On 20^th, the GSTR-3B Return is filed, through which after adjustment of the available ITC, GST is paid.

18.1 Availment of benefits at higher rate by overvaluing the goods

The exporters can overvalue the goods meant for export & pay IGST on the said value. Since IGST is paid at higher rate by overvaluing the goods and refund claim is processed on the basis of details of invoice such as Invoice No., Value, IGST amount & the concerned Shipping Bill No. only, the exporter gets the refund of IGST amount without any further verification. However, with the overvaluation of goods, simultaneously the exporter gets higher drawback at inflated value and also MEIS benefit. Though the exporter pays IGST at higher rate but anyway it is refundable.

Such goods are to be targeted which are having higher drawback and higher MEIS benefit.

18.2 Misuse of system based processing of IGST Refund

Since the IGST refund is processed through system & does not require any physical verification, there is scope of misuse of the said facility. Any exporter purchases the goods from a supplier on payment of GST, avails ITC of the GST paid amount & during the same month exports the said goods on payment of IGST. The exporter files the GSTR-1 return by providing the details of Invoice & shipping Bill & accordingly gets the refund of IGST, even in the case, where the exporter had neither filed the GSTR-3B nor paid the IGST. Also, the supplier, who had supplied the goods to the exporter, had neither filed the return nor paid the GST amount. Hence, the exporter had been sanctioned the refund of IGST, which was never paid. This issue is required to be addressed.

18.3 Supply of same Goods twice

To understand this, hypothetically it is assumed that “A” is the manufacturer of goods i.e. garments. For manufacturing garments, he has to procure raw materials such as fabric, lining , buttons etc. All the inputs will be GST paid and manufacturer would be getting ITC on such goods. Now he will supply (sell) his goods in domestic market without raising tax invoice for supply in cash. It means that there is no payment of GST and “A” has wrongly evaded and escaped from GST liability . But since he has manufactured the goods, he has to account for it, so “A” procures sub- standard goods of having same description from another supplier “B” without any tax invoice and supplies the said goods i.e garment to the exporter “C”, who exports the goods on payment of IGST and declare the value similar to the goods, which was sold/supplied in the domestic market. “A” uses the input tax credit for payment of GST for supply made to “C”, the exporter. Now the exporter “C”, who obtained the tax paid goods, exports the said goods on payment of IGST, which is refunded to him. It means the same goods are supplied twice, once evading GST and subsequently by getting refund of IGST paid.

19. Project Export

Unlike import , export has no regulation to govern Project Export . Gap in the law , is being exploited by the exporters , who are declaring the value of the export goods by including the charges for commissioning , erection , expenses incurred by engineers , employee in respect of travelling to site of project and accommodation thereof , which result in inflation of FOB value and undue accrual of export benefits such as drawback and MEIS.

In one case detected by SIIB(X) JNCH , exporter has declared the FOB value of the export goods including charges for commissioning ,erection, expenses incurred by engineers , employee in respect of travelling, accommodation charges at site of project. Further, the exporter classified the goods in one heading like project import. In absence of any such regulation, different export goods part of project export exported vide various S/Bills for which for a period of time were classified under one CTH. During investigation, the export goods were classified under different RITC as per their correct description .

As the FOB value was inclusive of miscellaneous expenditures as stated above, correct value also re-determined on the basis of Cost Certificate/ CA certificate under Rule 5 of Export Valuation Rule 2007, which resulted into deduction of charges of commissioning , erection, expenses incurred by engineers/employees in respect of travelling, accommodation charges etc from the FOB value. In terms of Notification No 89/2017–Cus (N.T) 21.09.2017 , FOB value was restricted up to 150% of declared value of Tax Invoice . This was done in keeping in view the basic principle that tax should not to be exported and exporter must be relieved from home grown taxes in order to maintain competitiveness of the goods . Since, charges of commissioning , erection , expenses incurred by engineers/employee in respect of travelling, accommodation charges etc cannot be relatable to manufacturing / processing or any operation carried out concerning export goods etc. therefore , benefit cannot be extended for such liabilities/expenses , which are not relatable to such activities.

20. Illegal Export of Buffalo Meat

In a case of export of Bufallo meat ,exporter did not subject the frozen boneless buffalo meat to mandatory tests such as inspection of the export consignments by the Veterinary doctor designated by Government of Haryana. Instead they furnished invalid Veterinary Health Certificates prepared by themselves and fraudulently obtained signature from Government Veterinary Doctors of Govt. of NCT, Delhi, whose jurisdiction inspection site was not falling. The same was submitted to Customs at the time of export as mandated by law.

No checks were carried out, consignment-wise, to determine whether the goods were really fit for human consumption and export worthy, as required under the law. No evidence was submitted by exporter showing that samples were ever taken from any of their export consignments ready for export and sent for testing to the Government laboratory for testing, which was mandatorily required before certifying that the consignment is fit for human consumption and export worthy;

The Exporter did not only failed to follow the mandatory Quality Control and Inspection procedures prescribed in the Export of Raw Meat (Chilled /Frozen) (Quality Control and Inspection) Rules, 1992, in respect of their exports but also evaded payment of Inspection fee, which was required to be paid to the Department of Animal Husbandry at the time of issuance of Vet. Health Certificate.

The non-compliance of conditions stated above had rendered the goods prohibited for exports. The prohibited goods by resorting to mis-declaration, misrepresentation etc, were exported ,exporter were ineligible for DEPB and VKGUY scrips and further the exporter had no title to transfer the DEPB credits. In the instant case, the Custom duty equivalent to VKGUY/DEPB credit amounting to Rs.2,29,35,968/- (Rupees Two Crore Twenty Twenty Nine Lakhs Thirty Five Thousand Nine hundred Sixty Eight only) was involved.

21. Illegal Export of **‘Peaco*ck Tail Feather**

In a case of export under free S/Bill , the goods were found ‘Peaco*ck Tail Feather’ on examination by wildlife inspector which was prohibited for export under Wildlife (P) Act, 1972. Preliminary investigations revealed that the Agra based exporter had declared the goods as “Sarkanda Reed” under the RITC No 44190010,whereas the goods were found to be “Peaco*ck tail feather” which was classifiable under RITC 05059010 and was prohibited for export under Schedule-2 of Export Policy 2009-14. Further, it was found that the CHA had filed S/Bill without authorization from the exporter and exporter denied filing of the said S/Bill. In the instant case ,the Shipping Bill was filed at ICD Tughlakabad and Let Export order was given by officer of ICD Tuglakabad, New Delhi and export was intended from JNCH.

SELF QUIZ TEST on SIIB Export

Q.1. Over-valuation of exports goods are done by exporter to claim ?

(i)Inadmissible drawback,

(ii)Undue MEIS benefit,

(iii)Both of the above,

(iv)None of the above

Q.2 in case of Project Export by Notification No 89/2017–Cus (N.T) 21.09.2017, ,FOB value can be restricted up to ?

(i) 150% of declared value of Tax Invoice

(ii) 130 % of declared value of Tax Invoice,

(iii) 175% of declared value of Tax Invoice

(ii) None of the above

Q.3 For the garments and clothing accessories to classify as babies garments ?

(i) Its height should not exceed 86 cms

(ii) Its height should not exceed 84 cms

(iii) Its height should not exceed 85 cms

(iv) None of the above

Q.4 Apex Court in case of Om Prakash Bhatia v CC(2003) 6 SCC 161=2003 AIR SCW 3452 held that ?

(i) over- invoicing of the goods for exportation is an offence under the Custom Act, 1962

(ii) by not complying with the conditions of export , goods held for liable to confiscation under section 113(d) of the Customs Act, 1962

(iii) Both of the above,

(iv) None of the above

Q5. Export of Red Sander is ?

(i)Prohibited

(ii) Restricted

(iii) Free

(iv)None of the above

Q.6. Export of Buffalo Meat ?

(i) Free

(ii) Prohibited

(iii) Restricted

(iv) None of the above

Q .7 Post GST, export is zero rated supply under which section of IGST Act ?

(i)Section 15

(ii)Section 16

(iii)Section 73

(iv)Section 2

Q.8- Zero rated supply under IGST Act means , which of the following ?

(i) that export does not attract any tax,

(ii) clearances for export are to be made under Letter of Undertaking.

(iii) if clearances for export are made on payment of IGST, the amount of IGST is refundable.

(iv)All of the above

Q.9 MEIS benefit can be claimed from which Ministry ?

(i) Finance Ministry

(ii) Commerce Ministry

(iii) Textile Ministry

(iv)None of the above

Q10. Modus Operandi tells us ?

(i) Trends of fraudulent export

(ii) pattern of contravention

(iii) items/commodities prone to fraud

(iv) All of the above

Ans 1(iii), 2(i), 3(i), 4(iii), 5(i), 6(ii), 7(ii), 8(iv), 9(ii), 10(iv)

PART -II of This Guide on “How Does SIIB Export Work?”

Please CHECK all the CBIC Circulars Concerning SIIB(Export ) Here. These all Circulars Form the Part II of the Entire Guide on “How Does SIIB (Export) Work- The Ultimate Guide for Customs Officers”.

************************

# MORE WORTHWHILE READS on MY TAX VIEWS:

Penalty for Escape of Duty U/S 28(1) of C.A.1962- is it Imposable?

Is Imposition of Redemption Fine Justified for Imports Under DEEC, EPCG etc.?

Compounding of offences under Customs Act vis-a-vis- CrPC

Arrest Under Customs Act, 1962- An Analysis

Searches Under Customs Act 1962- The Procedures and an Insights into

Recovery of Drawback Amount Where Exports Proceeds not realized

How Does SIIB (Export) Work- The Ultimate Guide for Customs Officers (2024)

FAQs

What is the work of SIIB in customs? ›

SIIB primarily deals with gathering of intelligence and the other functions include surveillance,search of premises etc. This unit carries out the investigationsof the cases they make.

Get More Info ›

What is the full form of TRC in customs? ›

It has been decided to set up a separate Tax Recovery Cell(Exports) (TRC(X)) in the Office of the Commissioner of Customs (Exports), Jawahar Custom House, Nhava Sheva for recovery of arrears of revenue arising on account of confirmed demands, penalties imposed etc.

See Details ›

What is the MCD in customs? ›

MCD(Manifest Clearing department)

MCD looks after the maintenance of Import & Export general manifest, record keeping of Bills of Entry & Shipping Bills after their closure.

What is the full form of AO in customs? ›

The file shall then be put up to Appraising Officer (A.O.), who will cross-check the particulars of Shipping Bill submitted by the exporter and the print out of Shipping Bill from EDI system.

What is customs procedure codes? ›

Put simply, a CPC code (Customs Procedure Code) is your reason for import or export, expressed as either a seven digit number or a six digit number and one letter.

What is customs cod? ›

The Customs Code is a unique numeric value that identifies a certain product category in international trade. Purpose of its introduction is to simplify the customs transit of the goods, which are classified through a worldwide shared nomenclature system.

What is customs clearance authorization? ›

The purpose of customs clearance is to ensure that all applicable import duties and taxes are paid and that goods comply with all relevant regulations. To clear customs, businesses or individuals must provide detailed information about the shipment, including its value, origin, destination, and contents.

Get More Info Here ›

What does AO stand for legal? ›

The Administrative Office of the United States Courts, or the Administrative Office (AO) for short, is the administrative agency of the United States federal court system, established in 1939.

What is AO designation? ›

“Assessing Officer” (AO) means the Income-Tax Officer or Assistant Commissioner of Income-Tax or Deputy Commissioner of Income-Tax or Joint Commissioner of Income-Tax or Additional Commissioner of Income-Tax who is authorized by the Board to exercise or perform all or any of the powers and functions conferred on, or ...

View Details ›

What is the work of customs service? ›

The Customs Division is charged with three-fold responsibilities which include the: Mobilisation of revenue from imports and exports. Facilitation of legitimate trade and. Provision of public security and safety.

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Is customs a good job? ›

Good pay and benefits: Customs officers typically earn a competitive salary and may also receive benefits such as health insurance, retirement plans, and paid time off.

How does clearing customs work? ›

Customs clearance is a process that involves the submission of documentation to the associated government custom agency and then the subsequent oversight and clearance of the goods in transit. The customs clearance documentation is assembled by the assigned customs broker to the shipper.

See Details ›

How Does SIIB (Export) Work- The Ultimate Guide for Customs Officers (2024)

Broad Objective of this Course on SIIB(x)

Table of Contents:Broad Contours of the Guide on SIIB(x)

Chapter 1: Introduction toSpecial Intelligence & Investigation Branch, Export [SIIB (x)]

Chapter 2. Roles of Special Intelligence & Investigation Branch, Export

Chapter 3. Legal Provisions for Functioning of SIIB Export

3.1 Provisions of the Customs Act, 1962

3.2 Relevant Provisions of Allied Acts Applicable in Fraudulent Export of Goods

3.3 Provisions of Foreign Trade Policy

3.4 Provisions of General Clauses Act, 1897

3.5. Provisions of Limitation Act,1963 Applicable in Investigation of Fraudulent Export Conducted by SIIB(X)

SELF TEST QUIZ on Rules & Regulations Applicable in SIIB(x)

Chapter 4 : How to Conduct Investigation in SIIB Export [SIIB (x)]

SELF TEST QUIZ on Investigation & Issuance of SCN etc.

Chapter 5- Role of Officers Deployed in SIIB (X)

5.1 Role of AC/DC

Chapter -6:Modus Operandi Detected by SIIB (x)

6.1 Over Valuation of Export Goods

6.2. Wrong Availment of MEIS Benefits

6.2.1 Mis-classification of CTH to Avail Higher Rate of MEIS

6.3 Splitting of S/Bills

6.4 Fabric

6.4.1 Mis-declaration of Composition of Fabric

6.4.2 Mis-declaration of Weight of Fabric

6.5. Cotton Twine Ropes

6.6. Export of Co-axial Cable

6.7. Export of Truss Nuts/Adjusting Nuts

6.8. Carpet

6.8.1 Mis-declaration of Quantity of Carpet

6.8.2 Mis-declaration of Machine made Carpets

6.8.3 Over- valuation of Carpet

6.8.4 Mis- Classification of RITC /DBK heading of Polypropylene Mats or floor covering

7. Garments

7.1 Mis-declaration of Quantity

7.2 Mis-declaration of Babies Garments as Girls Dress/Ladies Dress

7.3 Mis-declaration of garments without Jacket as Suit

7.4 Mis-declaration of Ladies Dress/Ensembles

7.5 Scarves

8. Mis- classification under DBK heading 940401

9 . Brass Item

10. Wrong Classification of Hair pins, Curling pins, Curling grips

11. Stainless Steel

12. CHEMICALS

13. Leather Item

14. SCOMET ITEM

15. Violation of Conditions of EPCG

16. RED SANDERS

16.1 Forged Documents

16.2 Replacement of Cargo

16.3 Mis-use of IEC / CHA Code of genuine exporter / CHA

17. Misuse of Brand Rate and All Industry Rate of Drawback

18. Fraud Under GST

18.1 Availment of benefits at higher rate by overvaluing the goods

18.2 Misuse of system based processing of IGST Refund

18.3 Supply of same Goods twice

19. Project Export

20. Illegal Export of Buffalo Meat

21. Illegal Export of ‘Peaco*ck Tail Feather

SELF QUIZ TEST on SIIB Export

PART -II of This Guide on “How Does SIIB Export Work?”

FAQs

What is the work of SIIB in customs? ›

What is customs procedure codes? ›

21. Illegal Export of **‘Peaco*ck Tail Feather**