2008 (1) TMI 167 - AT - Customs

Buyer of good abetting sale of exempting imported goods export obligation not fulfilled sale proceeds transferred by buyer from his account to importer account held that penalty on buyer can t be imposed as he has not dealt with goods directly moreover he wasn t aware that goods are liable to confiscation proceeds from smuggling are liable to confiscation u/s 121 not u/s 111 hence penalty not imposable u/s 112 penalty u/s 112 is imposable only if goods are confiscated u/s 111

Summary

Issues:
- Allegation of acting as a front man for a partnership firm
- Transfer of funds to the partnership firm's account
- Sale of raw silk without fulfilling export obligations
- Imposition of penalty on the appellant

Analysis:

1. The case involved allegations against the appellant for acting as a front man for a partnership firm by transferring funds to the firm's account and aiding in the sale of raw silk without fulfilling export obligations. The Commissioner of Customs upheld the liability to confiscate raw silk, confirmed duty demand, and imposed penalties on the firm and co-noticees. The appellant faced penalties of Rs. 10 lakh and Rs. 3 lakhs in separate orders.

2. The Tribunal considered whether the penalties imposed on the appellant were justified. It was noted that the appellant did not physically handle the raw silk but only dealt with bank accounts. Citing precedent cases, it was highlighted that physical contact with goods is necessary for penalty imposition under relevant provisions. The Tribunal referred to decisions in similar cases and concluded that the appellant, not having physically dealt with the goods, could not be penalized under the law.

3. The Revenue relied on a Tribunal decision to argue that sale proceeds were liable to confiscation as goods under the law. However, the Tribunal clarified that confiscation and penalties are subject to specific provisions of the Customs Act. It was emphasized that penalties under Sec.112 can only be imposed if goods are liable to confiscation under Sec.111, with strict adherence to the legal requirements.

4. Based on the discussions and legal interpretations, the Tribunal set aside the penalties imposed on the appellant in both cases. Following the precedent set by a Larger Bench decision, the appeals were allowed, and the penalties were revoked. The judgment emphasized the importance of physical handling of goods and the specific legal criteria for penalty imposition under the Customs Act.

This detailed analysis of the judgment highlights the key issues, legal interpretations, and the ultimate decision regarding the penalties imposed on the appellant in the case.