2018 (10) TMI 1855 - AT - Customs

Levy of penalty under Section 114AA of the Customs Act, 1962 - opening of fake bank accounts in the name of appellant - HELD THAT - The appellant had already studied upto graduation, and was further pursuing hotel management courses. Thus, the appellant was an adult aged about 22 years. Thus, it cannot be said that the appellant was of tender age and innocent. Further, it is not coming from the facts on record that the appellant knowingly did the acts of omission and commission during his pleasure trip to Hong Kong. However, the appellant was paid about ₹ 20,000/- by Palta Brothers and thus, the appellant appears to have been lured in signing various documents for opening of bank account in connection with the company, without much understanding the consequences. The penalty is rightly imposed on the appellant - But the penalty imposed is excessive, the penalty reduced from ₹ 1,00,000/- to ₹ 25,000/- - appeal allowed in part.

Summary

Issues:
Whether the appellant has been rightly imposed a penalty under Section 114AA of the Customs Act, 1962.

Analysis:
The appellant, a student at the time, was lured by relatives for a free trip to Hong Kong where bank accounts were opened in his name without his knowledge. The appellant had no involvement in any business activities and was unaware of the fraudulent use of his signatures. Shri Neelesh Bhandari orchestrated the scheme, misusing the appellant's innocence. The appellant cooperated with authorities upon learning of the misuse of his identity.

The appellant, upon returning to India, took immediate steps to freeze the accounts upon discovering their misuse. The appellant never dealt with the company M/s. Moral Colour Limited and had no knowledge of its operations. The appellant's lack of knowledge and innocence were exploited by his cousins and associates in obtaining his signatures on various documents.

The appellant's response to the show cause notice highlighted his lack of involvement in any illegal activities and emphasized that he was a victim of conspiracy. The appellant's innocence was evident from the circumstances surrounding the case, and he had no intention to engage in any fraudulent transactions.

The Adjudicating Authority held the appellant liable for penalty under Section 114AA based on his involvement in opening the bank accounts and becoming a director of the company. However, the Tribunal found the penalty excessive considering the appellant's circumstances and reduced it from &8377; 1,00,000 to &8377; 25,000. The appellant was deemed to have been lured into signing documents without a full understanding of the implications, mitigating the severity of the penalty.

In conclusion, while the appellant was held liable for penalty under Section 114AA, the Tribunal acknowledged the appellant's lack of intent and reduced the penalty amount due to the circumstances surrounding the case. The appellant's innocence and cooperation with authorities were crucial factors in the Tribunal's decision to reduce the penalty imposed.