The Chennai Bench of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT) has reduced the penalty imposed on a consultant accused of facilitating fraudulent fulfilment of export obligations under the EPCG Scheme by arranging third-party shipping bills unrelated to the actual importer-exporter.
The bench of M. Ajit Kumar (Technical Member) while upholding the findings of fraud and the applicability of penalties under Sections 112(a) and 114AA of the Customs Act, held that the principle of proportionality required moderation of the penalty amount.
The appeal was filed by Shri S. Kishore, Managing Director of M/s Nandhishiv Impex Pvt. Ltd., challenging the Order-in-Original passed by the Commissioner of Customs, Chennai-IV.
As per the facts recorded by the Tribunal, M/s Chromaprint India Pvt. Ltd., Coimbatore had imported machinery and capital goods under the Export Promotion Capital Goods (EPCG) Scheme by availing exemption benefits under Customs Notifications No. 97/2004-Cus and 103/2009-Cus.
The Directorate of Revenue Intelligence (DRI) later found that the company allegedly fulfilled its export obligation through shipping bills belonging to unrelated third-party garment exporters and fraudulently obtained Export Obligation Discharge Certificates (EODCs) from the DGFT authorities.
According to the department, this rendered the importer ineligible for the customs exemption benefit and exposed it to recovery of customs duty amounting to more than ₹3.17 crore along with interest. The imported goods valued at nearly ₹11.89 crore were also proposed for confiscation under Sections 111(d) and 111(o) of the Customs Act.
The show cause notice alleged that the appellant acted as a mediator in arranging unrelated third-party shipping bills to falsely demonstrate fulfilment of export obligations. Consequently, penalties were proposed under Sections 112(a) and 114AA of the Customs Act.
Before the Tribunal, the appellant argued that he merely handled EPCG and EODC documentation and had no involvement in the export transactions themselves. He contended that the shipping bills and declarations were supplied by the importer after exports were completed and that he only submitted signed documents.
The appellant further submitted that the principal noticees, including the importing company, had already approached the Settlement Commission and settled the dispute by paying duty, fine and penalties. He argued that continuation of proceedings against him was unjustified and sought reduction of the penalties imposed.
The Revenue, however, strongly opposed the plea and relied upon statements recorded during investigation. The department submitted that the appellant had admitted to arranging third-party shipping bills on commission for falsely showing fulfilment of export obligations and had received over ₹41 lakh for the activity.
The Revenue also pointed out that the appellant’s statement had never been retracted and that evidence established his active role in obtaining EPCG licences and coordinating with unrelated exporters.
After examining the records, the Tribunal observed that the case involved fraudulent use of EPCG licences and that the licences as well as the EODCs had subsequently been cancelled by the JDGFT authorities, thereby substantiating the fraud allegations.
The Tribunal held that the appellant’s admitted conduct of arranging unrelated shipping bills had rendered the imported goods liable for confiscation under Section 111 and therefore attracted a penalty under Section 112(a). It further held that submission of false shipping bills as proof of non-existent exports clearly attracted Section 114AA dealing with use of false documents in customs transactions.
However, while considering the quantum of penalty, the Tribunal emphasized that proportionality must be maintained. It noted that the Managing Director of the importing company, who had allegedly initiated the fraudulent arrangement, was imposed only a ₹1 lakh penalty by the Settlement Commission.
The Tribunal held that the appellant’s liability could not exceed that level even if he played an equally important role in the fraud. Accordingly, the penalties imposed under Sections 112(a) and 114AA were reduced from ₹1 lakh each to ₹50,000 each, bringing the total penalty down to ₹1 lakh.
The appeal was disposed of with consequential relief, if any, in accordance with law.
Case Details
Case Title: Shri S. Kishore, Managing Director Versus Commissioner of Customs
Citation: JURISHOUR-1135-CES-2026(CHE)
Case No.: Customs Appeal No. 42439 of 2016
Date: 05.05.2026
Counsel For Appellant: M. Kannan, Advocate
Counsel For Respondent: Vineet Goyal, Authorised Representative
