2015 (2) TMI 1070 - AT - Customs

Imposition of penalty - Bottles should have been delivered in air sealed container and the appellant s employees failed to do so - Held that - The fact remains that bottles were sold to international passenger and what international passenger did with it may not be and cannot be under the control of the appellant-company. Even if the appellants were to follow the procedure of packing the bottles in air sealed packs, there is no guarantee that such bottles could not have been sold before the passengers left the airport. Under the circumstances, the air sealed packing can only be one of the precautions. Ultimately the fact that the practice came to notice of the customs department which was able to detect such omissions is the factor that has to be taken note of. From the facts on record and as discussed above, it cannot be said that appellant has rendered the goods liable to confiscation or has been concerned with dealing with such goods. The only question will be the responsibility that has to be fixed on the company. However, in this case in my opinion appellant deserves a lenient treatment having regard to the facts discussed above which show that the only omission is procedural in nature and there is no allegation that the bottles have been sold to persons who are not entitled to purchase from the duty-free shop - Decided in favour of assessee.

Summary

Issues:
1. Imposition of penalty on the appellant-company for procedural violation in the duty-free shop operation.

Analysis:
The judgment by the Appellate Tribunal CESTAT Bangalore dealt with an appeal against a penalty of Rs. 10,000 imposed on the appellant-company for procedural lapses in their duty-free shop in Hyderabad. The appellant admitted that some employees engaged in wrong practices by not following the required procedure, leading to the sale of foreign origin liquor bottles to emigration police constables without proper air sealed packaging, as mandated by the license terms. The primary ground for penalty imposition was the failure to deliver the bottles in air sealed containers, a procedural violation highlighted by the customs department.

The appellant's counsel argued that while acknowledging the mistake made by the employees, the company did not intend to engage in wrongful practices. They contended that since the liquor was sold to international passengers, the subsequent actions of those passengers were beyond the control of the company. The counsel emphasized that the penalty was being challenged on the basis of it being a matter of prestige for the company, which was committed to avoiding any misconduct in its operations.

On the other hand, the Additional Commissioner (AR) representing the customs department emphasized the importance of proper accounting and air sealed packaging to prevent duty-free items from entering the country illegally. However, the Tribunal, after considering the submissions, noted that the ultimate responsibility for the incident could not be solely attributed to the appellant-company. Despite the procedural lapse, the Tribunal observed that the company had not rendered the goods liable to confiscation or engaged in unauthorized dealings.

The Tribunal concluded that while procedural errors were evident, the circumstances indicated that the appellant deserved leniency. Noting that the omission was procedural in nature and there was no evidence of unauthorized sales, the Tribunal set aside the penalty imposed on the appellant-company. The judgment highlighted the distinction between procedural lapses and deliberate misconduct, ultimately ruling in favor of the appellant based on the specific facts and circumstances of the case.