2020 (1) TMI 478 - AT - Customs

Misdeclaration of imported goods - Behind the Rice Cookers , Cigarettes of foreign origin were found - prohibited goods or not - imposition of penalty u/s 112 of CA - quantum of penalty - HELD THAT - Shri Pawan Kumar Ralli, Shri Naresh Dutta and Shri Sreepraksh Tiwary were complicit in this smuggling racket and hence liable for penalty under Section 112. As per the statutory provisions of Section 112, the cases are divided in three categories for the purpose of computation of maximum penalty imposable. One of the categories is of those cases wherein the value declared is higher than the actual value of goods in question - In the instant case, the actual value of goods is found to be much higher than the value declared. Therefore, this category is not applicable. The second category is of prohibited goods. In the show cause notice, it is stated that Rule 11 of the Foreign Trade (Regulation) Rules, 1993 stipulates that on importation of goods, the owner shall state the true description in the Bill of Entry and the goods in question falls in the category of prohibited goods, by virtue of Section 111(d) of the Customs Act, 1962, renders the goods in question as prohibited. As per the judgment of Hon ble High Court in Gopal Saha vs. Commissioner of Customs 2016 (5) TMI 83 - CALCUTTA HIGH COURT , the goods in question cannot be termed as prohibited goods merely for misdeclaration in the Bills of Entry, for the purpose of imposing penalty under Section 112. Now, the only category left is of dutiable goods other than prohibited goods. In this category, maximum penalty impossible in 10% of duty sought to be evaded or five thousand rupees, whichever is higher, In the present case, the Customs Duty sought to be evaded is nowhere quantified. Learned Authorized Representative for the Revenue also failed to help in this regard. Now, therefore, maximum penalty impossible in the instant case is Rupees Five Thousand only. Accordingly, the penalty imposed upon Shri Pawan Kumar Ralli, Shri Naresh Dutta and Shri Sreepraksh Tiwary is reduced to ₹ 5,000/- each. Appeal allowed in part.

Summary

Issues:
1. Imposition of penalties under Section 112 of the Customs Act, 1962 based on smuggling activities.
2. Justification of penalties imposed on various individuals and entities involved in the smuggling racket.
3. Interpretation of statutory provisions for determining the maximum penalty imposable under different categories of cases.

Analysis:
1. The appeals were filed against an Order in Original passed by the Commissioner of Customs (Port), Kolkata, regarding a smuggling racket involving the misdeclaration of imported goods. The investigation revealed the involvement of specific individuals and entities in aiding and abetting the smuggling activities.

2. The penalties imposed under Section 112 of the Customs Act, 1962 were challenged by the appellants. Arguments were presented regarding the lack of evidence showing prior knowledge of the misdeclaration of goods by certain individuals and the excessive amount of penalties imposed beyond the statutory limits.

3. The Tribunal analyzed the statutory provisions of Section 112 for determining the maximum penalty imposable based on different scenarios. It was established that penalties cannot be imposed without evidence of prior knowledge of fraud and wrongful intent. The judgment of the Hon'ble High Court of Calcutta was cited to support the interpretation that misdeclaration in the Bill of Entry does not automatically classify goods as prohibited for penalty purposes.

4. The Tribunal differentiated between prohibited goods and dutiable goods under Section 112, emphasizing that penalties should be strictly construed and confined to goods expressly prohibited from importation. The quantification of duty sought to be evaded was crucial in determining the maximum penalty, which was found to be lacking in the show cause notice and the original order.

5. Consequently, the penalties imposed on the CHA firm and its employees were set aside due to insufficient evidence of prior knowledge. The penalties on individuals complicit in the smuggling racket were upheld but reduced to Rs. 5,000 each, as the duty sought to be evaded was not quantified. The judgment provided detailed legal reasoning and interpretations to justify the modifications in penalties for the appellants involved.

6. The appeals filed by the CHA firm and its employees were allowed, while the appeals filed by individuals complicit in the smuggling racket were partially allowed with reduced penalties. The consequential benefits were to follow as per the law, as pronounced in the open court on 17 December 2019 by the members of the Tribunal.