2015 (6) TMI 614 - AT - Customs

Imposition of penalties - smuggling of Ketamine Hydrochloride concealed in the export consignment as Onions - Misdeclaration of goods - Held that - Adjudicating authority has imposed penalty of ₹ 10,00,000/- on M/s. Manohar Enterprises and ₹ 5,00,000/- on Shri.R. Muthuramalingam, under Section 117 of the Customs Act. Therefore, by virtue of limitation provided under Section 117 adjudicating authority has no power to impose more than the limit specified under the section 117 of the Act, Therefore, imposition of penalty of ₹ 10,00,000/- and ₹ 5,00,000/- on the appellants exceeding ₹ 1,00,000/- is beyond the powers vested under Section 117 of the Customs Act. - appellants are liable for penalty under Section 117 of the Customs Act, maximum of ₹ 1,00,000/- on each appellant. The penalty imposed by the adjudicating authority in excess of ₹ 1,00,000/- is liable to be set aside on both the appellants. - Decided partly in favour of appellant.

Summary

Issues:
Imposition of penalty under Section 117 of the Central Excise Act on the appellants for smuggling Ketamine Hydrochloride concealed as Onions; Applicability of penalties on CHA firm and its partner; Limitation on penalty amount under Section 117 of the Customs Act.

Analysis:

1. Imposition of Penalty under Section 117: The case involved penalties imposed on the appellants, including a CHA firm and its partner, for their involvement in smuggling Ketamine Hydrochloride disguised as Onions. The adjudicating authority invoked Section 117 of the Customs Act for imposing penalties. However, it was found that the penalties of Rs. 10,00,000 and Rs. 5,00,000 imposed on the appellants exceeded the maximum limit of Rs. 1,00,000 specified under Section 117. The tribunal held that the adjudicating authority had no power to impose penalties beyond the prescribed limit, thereby setting aside the excessive penalties.

2. Role of Appellants and Liability: The appellants contended that they were not directly involved in the smuggling operation and that their clerk had colluded with the exporter. However, it was clarified that the actions of an employee, such as the clerk, could not absolve the appellants from liability. The tribunal emphasized that the penalties were imposed under Section 117, which pertains to contraventions not covered under other sections of the Customs Act. As the penalties were specifically invoked under Section 117 by the investigating agency and upheld by the adjudicating authority, the appellants were held liable for penalties up to Rs. 1,00,000 each.

3. Penalties on CHA Firm and Partner: The second appellant argued that since a penalty was already imposed on the CHA firm, no additional penalty could be levied on the partner of the firm. However, the tribunal clarified that the penalties were imposed under Section 117, which allows for penalties of up to Rs. 1,00,000 for contraventions not covered by other sections. Citing a High Court decision, the tribunal concluded that the penalties of Rs. 10,00,000 and Rs. 5,00,000 on the CHA firm and its partner exceeded the prescribed limit under Section 117. Therefore, the penalties were reduced to Rs. 1,00,000 each for both appellants, in line with the statutory provisions.

In conclusion, the tribunal partially allowed both appeals by setting aside the excessive penalties imposed on the appellants and modifying the orders to restrict the penalties to Rs. 1,00,000 each, in compliance with the limitations prescribed under Section 117 of the Customs Act.