2016 (12) TMI 521 - HC - Customs

Imposition of penalty - section 130 of Customs Act, 1962 - mens rea - Held that - upon examination on the material available on record, it becomes abundantly clear that in fact, the assessee was found guilty of mens rea of tempering with the goods that he was seeking to export. In the garb of exporting basmati rice, the assessee was trying to take out non-basmati rice which was clearly prohibited. There is a clear finding of fact recorded by the tribunal that not only was the assessee attempting to play fraud but also upon re-examination of the sample reports, it was found that the assessee had actually tried to export consignments of non-basmati rice which were prohibited to be exported by a Notification No. 39 (RE-2008)/2004-09 dated 19.9.2008 and in fact, it was found that every container was loaded with 55 bags of basmati rice and 430 bags of non-basmati rice and, therefore, the plea as made by learned counsel for the assessee that it was a case of mishandling of goods during loading, cannot be taken to be true. It was a deliberate strategy to keep the basmati rice in the front of container in order to avoid the detection of the non-basmati rice which was sought to be taken out surreptitiously - The imposition of penalty, therefore, is justified - appeal dismissed - decided against appellant-assessee.

Summary

Issues:
1. Upholding penalty under Section 114(1) of the Customs Act, 1962 without 'mens rea'
2. Upholding penalty under Section 114AA of the Customs Act, 1962 without 'mens rea'
3. Upholding penalty based on the appellant's role as a Customs House Agent without connivance allegations
4. Validity of the impugned order passed by the Tribunal

Analysis:

Issue 1:
The appellant challenged the imposition of penalty under Section 114(1) of the Customs Act, 1962, arguing the absence of 'mens rea.' The appellant relied on a judgment from the High Court of Gujarat. However, the High Court of Allahabad found that the appellant was indeed guilty of 'mens rea' as evidenced by tampering with the goods meant for export. The tribunal established that the appellant attempted to export non-basmati rice under the guise of basmati rice, a clear violation of regulations. The deliberate strategy employed by the appellant to conceal non-basmati rice in containers loaded with basmati rice indicated fraudulent intent. Consequently, the imposition of penalty under Section 114(1) was deemed justified.

Issue 2:
Regarding the penalty imposed under Section 114AA of the Customs Act, 1962, the appellant contested the absence of 'mens rea' as a necessary element. However, the tribunal's findings revealed that the appellant's actions demonstrated a deliberate attempt to export prohibited goods. The appellant's plea of mishandling during loading was refuted, with evidence showing a calculated effort to deceive authorities. The High Court upheld the penalty under Section 114AA based on the established facts and the appellant's failure to challenge them.

Issue 3:
The appellant questioned the penalty upheld by the tribunal due to their role as a Customs House Agent without allegations of connivance with the exporter in mis-declaring goods. However, the High Court found that the appellant's active involvement in attempting to export prohibited goods, regardless of connivance, warranted the penalty. The deliberate act of concealing non-basmati rice within basmati rice containers demonstrated fraudulent intent, justifying the penalty imposed.

Issue 4:
The appellant contended that the impugned order passed by the tribunal was contrary to the provisions of the Customs Act, 1962 and the facts on record. However, the High Court, after examining the material available, concluded that the appellant's actions were deliberate and fraudulent. The established facts, including the deliberate attempt to export non-basmati rice, were not challenged by the appellant. Consequently, the High Court ruled against the appellant, upholding the penalty and dismissing the appeal.

In conclusion, the High Court of Allahabad upheld the penalties imposed on the appellant under Sections 114(1) and 114AA of the Customs Act, 1962, based on the established fraudulent actions aimed at exporting prohibited goods. The appellant's attempts to deceive authorities by concealing non-basmati rice within basmati rice containers were deemed deliberate and justified the penalties imposed.