2021 (12) TMI 795 - AT - Customs

Levy of penalty u/s 114 and 114AA of the Customs Act, 1962 - Smuggling - export of red sanders illegally in the guise of Polished Granite Slab - HELD THAT - The Revenue, even though has noted the above discrepancies, has never bothered to investigate further, but rather levied the impugned penalties on the assessee without there being any direct or even circumstantial evidence against the assessee. The Hon ble High Court of Delhi in the case of KUNAL TRAVELS (CARGO) VERSUS COMMISSIONER OF CUSTOMS (IMPORT GENERAL) NEW CUSTOMS HOUSE, IGI AIRPORT, NEW DELHI 2017 (3) TMI 1494 - DELHI HIGH COURT had an occasion to consider a more or less identical issue, for violation of Customs Brokers Licensing Regulations and had inter alia ruled that the agent is not an inspector, but rather a processing agent of documents with respect to clearance of goods through Customs House; that the mentioning of IE Code of the exporter in the shipping bill would itself reflect that before the grant of such IE Code, a background check of the importer / exporter had been undertaken by the Customs Authorities and therefore, there could be no scope to doubt the identity of the exporter. The Revenue has not made any attempt to attribute the prior knowledge as to the involvement of the assessee-respondent right from the beginning in the alleged illegal import of red sanders. Further, the Revenue has also not established as to which act or omission on the part of the assessee-respondent herein that rendered the goods in question liable for confiscation, because such act or omission would have to be a deliberate act or omission. The Revenue has not established its case as regards penalty under Sections 114 and 114AA of the Customs Act, 1962 against the Customs Broker-respondent herein - Appeal dismissed - decided against Revenue.

Summary

Issues:
1. Imposition of penalties under Sections 114 and 114AA of the Customs Act, 1962 on the assessee-respondent.
2. Allegations of involvement in the smuggling of red sanders against the Customs Broker.
3. Interpretation of mens rea in the context of penalty imposition.
4. Failure to establish direct or circumstantial evidence against the assessee-respondent.
5. Comparison with a similar case decided by the Hon'ble High Court of Delhi.

Analysis:

The appeal before the Appellate Tribunal CESTAT Chennai involved the imposition of penalties under Sections 114 and 114AA of the Customs Act, 1962 on the assessee-respondent. The impugned Order-in-Appeal had set aside the penalties imposed by the Commissioner of Customs (Appeals-II), Chennai. The case revolved around an attempt to export red sanders illegally disguised as "Polished Granite Slab," leading to the seizure of red sanders valued at &8377; 5.48 crores. The assessee-respondent, a Customs Broker, was alleged to be involved in an elaborate conspiracy to smuggle red sanders logs.

The Adjudicating Authority had imposed penalties on the assessee-respondent for not verifying antecedents of overseas buyers and other crucial details. However, the First Appellate Authority deleted the penalties, citing lack of mens rea and failure to establish direct involvement in smuggling. The Revenue contended that mens rea was not essential for penalty imposition, referencing past judgments. On the contrary, the Advocate for the assessee-respondent supported the First Appellate Authority's findings, highlighting discrepancies in the investigation and lack of evidence against the assessee.

The Tribunal noted that the Revenue failed to attribute prior knowledge of the alleged illegal import to the assessee-respondent. It emphasized the importance of deliberate acts or omissions leading to confiscation, which were not proven in this case. Referring to a similar case decided by the Hon'ble High Court of Delhi, the Tribunal stressed that Customs Brokers act as processing agents and are not inspectors. The Tribunal concluded that the Revenue did not establish a case for penalties under Sections 114 and 114AA, hence dismissing the Revenue's appeal and allowing the cross-appeal filed by the assessee-respondent.

In light of the detailed analysis and comparison with relevant legal precedents, the Tribunal found no grounds to interfere with the findings of the First Appellate Authority. The judgment was pronounced on 17.12.2021, dismissing the Revenue's appeal and treating the cross-appeal as allowed.