2018 (5) TMI 615 - AT - Customs

Penalty u/s 114 and 114AA of the Customs Act, 1962 - wilful acts of omission and commission of misdeclaration of the value - Held that - the Adjudicating Authority has not been able to pinpoint specifically the role attributable to appellants herein to hold them on charge of abetment of misdeclaration - Similar issue had come up before the Tribunal in the case of Somaiya Shipping Clearing Pvt. Ltd., 2005 (12) TMI 151 - CESTAT, MUMBAI , wherein the Tribunal held that penalty under Customs Act cannot be imposed on CHA and its directors in case of misdeclaration of value and description if no role is found in such contravention - penalty cannot sustain - appeal allowed - decided in favor of appellant.

Summary

Issues: Penalties imposed under Sections 114 and 114AA of the Customs Act, 1962 for abetment of fraudulent export through misdeclaration of value.

Analysis:
1. Penalties Imposed: The appeals challenged penalties imposed under Sections 114 and 114AA of the Customs Act, 1962 on the appellants for their alleged involvement in abetting fraudulent export by misdeclaring the value of Cotton and polyester garments. The Adjudicating Authority concluded that the appellants had abetted the offense through willful acts of omission and commission, leading to inflated values for higher drawbacks from the Government of India.

2. Role of Tass Clearing Services Pvt. Ltd.: The Adjudicating Authority found Tass Clearing Services Pvt. Ltd. and its Executive Director responsible for failing to obtain authorization from the exporter, neglecting to ensure compliance with customs regulations, and not exercising due diligence in verifying information. The Authority held them accountable for abetting the attempted fraudulent export by misdeclaring quantity and value to obtain higher drawbacks, making the goods liable for seizure and confiscation under relevant provisions of the Customs Act, 1962.

3. Legal Precedent: The appellants argued that the Adjudicating Authority failed to specify the role played by them in the alleged abetment of misdeclaration. Citing a previous Tribunal case, it was highlighted that penalties under the Customs Act cannot be imposed on Customs House Agents (CHAs) and their directors if they are not directly involved in the misdeclaration and have acted based on information provided by the exporter. The Tribunal's decision emphasized that penalties cannot be justified solely on the basis of failure to produce an authorization letter from the exporter.

4. Tribunal Decision: In light of the legal precedent and the lack of specific findings attributing a role to the appellants in the misdeclaration, the Tribunal held that the penalties imposed were unsustainable. Relying on the previous case law, the Tribunal set aside the penalties and allowed the appeals, concluding that penal action against the CHA and its Director was not justified in the absence of direct involvement in the misdeclaration. The operative part of the order was pronounced in open court, setting aside the penalties imposed on the appellants.

This detailed analysis of the judgment highlights the issues of penalties imposed for abetment of fraudulent export through misdeclaration of value and the Tribunal's decision to set aside the penalties based on the lack of direct involvement established in the case.