2017 (7) TMI 1410 - AT - Customs

Levy of penalty on CHA - excess payment of drawback to the appellant, due to wrong mentioning of rates in the bills of entry by CHA - HELD THAT - The imposition of penalty is on the sole technical ground of the error on the part of the CHA. To error is human and every error whether bona fide or mala fide will not attract penalty. Penalty by itself simplicitor suggests penal action, which is required to be taken against a person with the mala fide mind or fraudulent action. Such simple mistakes cannot be put to penal liabilities on the part of the person concerned, especially when he himself has detected the mistake and rectified the same. The imposition of penalty is unjustified - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under Section 114AA of the Customs Act, 1962 on a CHA for filing bill of lading under the wrong rate of drawback.

Analysis:
The appeal challenged the imposition of a penalty of ?25,000 on the CHA under Section 114AA of the Customs Act, 1962. The appellant, a Customs House Agent (CHA), filed a bill of lading for the export of paper under drawback, mistakenly claiming a higher rate of drawback for all types of paper. This error led to an excess payment of drawback amounting to ?3,71,703. The exporter discovered the mistake and voluntarily repaid the excess amount along with interest before any adjudication. Despite this, a penalty was imposed on the CHA based on the premise that no mens rea (guilty mind) is necessary for penalty imposition.

Upon review, it was observed that the penalty was imposed solely on technical grounds due to the error made by the CHA. The judgment highlighted that errors, whether intentional or unintentional, do not automatically warrant penalties. Penalties are typically reserved for actions involving malice or fraud. In this case, where the CHA identified and rectified the mistake themselves, the imposition of a penalty was deemed unjustified. Consequently, the penalty was set aside, and the appeal was allowed on this basis.

This judgment underscores the principle that penalties should be reserved for deliberate wrongdoing rather than honest mistakes. It emphasizes the importance of considering intent and circumstances before imposing penalties under statutory provisions like Section 114AA of the Customs Act, 1962.