2018 (7) TMI 54 - AT - Customs

Penalty u/s 114 of the CA 1962 - smuggling - Ketamine Hydrochloride, a restricted item, was attempted to be exported by concealment in the said export consignment by issuing signed blank documents in respect of M/s. Moshee Enterprises, without abundant caution and without any effective control over the employees. Held that - There is no allegation that the respondents were in any way involved or connived in the attempt to illicitly smuggle out ketamine hydrochloride. At the most, the respondent may have fallen foul of their responsibilities in the CBLR 2013, but failure to control the staff or any other failure of the CBLR cannot translate into doing or committing to any act to render the goods liable for confiscation under Section 113 - penalty not warranted - appeal dismissed - decided against Revenue.

Summary

Issues:
Penalty under Section 114 of the Customs Act 1962 for omission by the respondent.
Validity of penalties imposed on the respondent.
Appeal against the Order-in-Original imposing penalties.

Analysis:

1. The case involved penalties imposed on M/s. Sri Durga Shipping Agencies under Section 114 (i) and Section 114AA of the Customs Act 1962, which were later waived by the Commissioner (Appeals). The department appealed this decision before the Tribunal.

2. The appellant argued that the respondent had omitted to exercise due care and diligence by allowing signed shipping bill documents to be used by an alleged exporter, resulting in the attempted smuggling of a restricted item, Ketamine Hydrochloride. The appellant contended that the penalties under Section 114 were justified due to the respondent's lack of caution and control over employees.

3. The respondent, on the other hand, claimed that the signed documents were provided in good faith to their branch manager for filing shipping bills, but the manager, in connivance with others, forged signatures and attempted illicit export without the respondent's knowledge. The respondent denied involvement or knowledge of the fraud and highlighted that they had reported the incident to the police.

4. After hearing both sides and reviewing the records, the Tribunal found no evidence implicating the respondent in the attempted smuggling of Ketamine Hydrochloride. While acknowledging potential lapses in following the CBLR 2013, the Tribunal concluded that these did not amount to acts rendering the goods liable for confiscation under Section 113. Therefore, the Tribunal upheld the decision of the Commissioner (Appeals) to waive the penalties imposed on the respondent, dismissing the department's appeal.

5. The judgment emphasized that mere failures in controlling staff or other regulatory lapses do not establish involvement in illicit activities. As there was no proof of connivance or participation in the smuggling attempt, the penalties imposed on the respondent were deemed unjustified, leading to the dismissal of the department's appeal.

This detailed analysis of the judgment highlights the key arguments presented by both parties, the legal basis for imposing penalties, and the Tribunal's reasoning for upholding the decision to waive the penalties imposed on the respondent.