2017 (4) TMI 483 - AT - Customs

Imposition of penalty u/s 112(a) and Section 114AA of the CA, 1962 - Held that - it is but obvious that the adjudicating authority has been unjudicious and peremptory in imposition of the impugned penalty u/s 114AA, since, unless it is proved that the person to be penalized, has knowingly or intentionally implicated himself in use of false and incorrect materials, there can be no justification for penalty under that section. This requirement has not been satisfactorily met either in the notice or in the impugned order and hence I do not have any hesitation in setting aside the same. Coming to penalty u/s 112 (a) ibid, notwithstanding the many protestations of the appellant, in an exercise involving import spanning 20 consignments, appellant as CHA cannot claim that they had no inkling of what was going on. No proof is adduced anywhere that he actively involved in the fabrication of false material, nonetheless the very fact that he was connected with the main player involved will definitely indicate some level of knowledge of the modus operandi, even though it may be to a smaller extent. In the event, penalty u/s 112 (a) is therefore imposable in this case. Appeal allowed - decided partly in favor of appellant.

Summary

Issues involved: Dispute over penalties imposed under Sections 112(a) and 114AA of the Customs Act, 1962.

Analysis:

1. Penalty under Section 114AA:
- The appellant contested the penalty under Section 114AA, arguing that the conditions for imposition were not met.
- The appellant's advocate referred to the 27th Standing Committee Report on Finance (2005-2006) regarding the intention behind inserting Section 114AA, emphasizing the need for knowledge and intention for penal provisions to apply.
- The advocate cited case laws to support the argument.
- The respondent opposed the appeal, asserting that the appellant actively aided in the smuggling operation.
- The tribunal found the imposition of the penalty under Section 114AA unjustified due to lack of proof of knowing involvement in using false materials.

2. Penalty under Section 112(a):
- The appellant's role as a Custom House Agent (CHA) in the importation of 20 consignments was examined.
- The tribunal acknowledged the appellant's connection to the main player but found no evidence of active involvement in fabricating false material.
- Despite this, the tribunal deemed some level of knowledge due to the association with the main player.
- The tribunal reduced the penalty under Section 112(a) from ?10 lakhs to ?5 lakhs, considering the proportionality of the penalty to the CHA's role.

3. Overall Analysis:
- The tribunal criticized the adjudicating authority for the lack of reasoned analysis in imposing penalties.
- It highlighted discrepancies in the order and the failure to establish the appellant's direct involvement in the smuggling activities.
- The tribunal emphasized the importance of proving intentional engagement in fraudulent activities for penalty imposition.
- Ultimately, the tribunal set aside the penalty under Section 114AA and reduced the penalty under Section 112(a) based on the appellant's role and level of involvement.

This detailed analysis of the judgment provides a comprehensive understanding of the issues involved and the tribunal's decision regarding the penalties imposed under the Customs Act, 1962.