2017 (10) TMI 764 - AT - Customs

Penalty on CHA u/s 114(i) and 114 AA of the CA, 1962 - abetting with the exporters to clandestine export of their product - it was alleged that the main appellant herein being a CHA has not verified the antecedent of the exporters who sought to export Ketamine Hydrochloride in the guise of garments but did not notice it was concealed inside the said consignment which was detected after the Customs investigation and based on information - Held that - when the adjudicating authority himself has abandoned the allegations in the show-cause notice for the violation of the Customs Act 1962, there being absence of evidence which indicate that appellant had a role, which is tantamounts to abettment in export of goods which are liable for confiscation, penalties imposed on these appellants are liable to be set aside - similar issue decided in the case of Sarosh Nagarwala, Skylark Travels Pvt Ltd, Flavian Walter D Souza Versus Commissioner of Customs (Export) 2017 (1) TMI 405 - CESTAT MUMBAI , where it was held that provisions of Customs Act cannot be applied for in case of there being no finding as to the role attributable to appellants - appeal allowed - decided in favor of appellant.

Summary

Issues:
Penalty imposed under provisions of Section 114(i) and 114 AA of the Customs Act, 1962.

Analysis:
The judgment involves two appeals challenging penalties imposed under Section 114(i) and 114 AA of the Customs Act, 1962. The adjudicating authority held that a company and its manager should be penalized for abetting the clandestine export of Ketamine Hydrochloride. The main issue revolves around whether the penalties were rightfully imposed on the appellants for violating the Customs Act.

The show-cause notices alleged that the company, a Customs House Agent (CHA), failed to verify the antecedents of exporters who concealed contraband in their consignments. The company contested the notices, arguing that penalties should not be imposed. The adjudicating authority disagreed and imposed penalties, leading to the appeals.

The main appellant, the CHA company, was accused of not conducting proper verifications as required under the Customs Act. The adjudicating authority found that the company's failure allowed fraudsters to smuggle contraband. The authority also highlighted regulatory provisions that the company failed to comply with, leading to the abetment of the alleged export.

Regarding the manager of the company, it was found that he personally knew individuals involved in suspicious activities but failed to exercise due diligence. He accepted consignments without proper verification, rendering himself liable for penal action under the Customs Act.

The Tribunal analyzed the findings of the adjudicating authority and compared them to relevant legal precedents. It was observed that the authority did not sufficiently establish the appellants' role in violating the Customs Act, focusing more on regulatory breaches. The Tribunal cited a previous case to emphasize that penalties under the Customs Act should follow a clear link between the actions of the appellants and the goods being liable for confiscation.

Consequently, the Tribunal allowed the appeals, setting aside the impugned order that imposed penalties on the appellants. The judgment highlighted the importance of establishing a direct connection between the actions of Customs House Agents and penalties under the Customs Act, emphasizing the need for evidence of abetment in smuggling activities for penalties to be justified.