2023 (9) TMI 969 - AT - Customs

Levy of penalty on custodian - allegation of clandestine removal - Cosmetics items removed in the guise of Baby diapers - exercise of proper diligence or not - HELD THAT - There is nothing in the public notice, which required the employees of the ICD/custodian to refer to ICEGATE prior to public notice of 2015. The findings of lower authority to that extent is erroneous and not sustainable - Support found from the conduct of the department which has not issued either a penal or disciplinary SCN to the employees or CFS involved in other two transactions. Even if the committed omission in their case was for one bill of entry, each. The slandered of diligence cannot be different. The number of transactions can be basis for deciding quantum of punishment, if punishment for a lapse is required. Department cannot pick and choose to decide the lack of diligence by number of transactions even when the employee involved in extra diligence believed that documents not found was due to some system error or failure. There are no no merits in the impugned order an penalty imposed under Sub-Regulation 8 of Regulation 12 set aside, and it is found that the additional condition imposed by public notice of 2015, itself was procedural improvement under taken by the department through which requirement of referring to the ICEGATE was brought in - the employer cannot be punished for such facts of discretion or extra diligence than prescribed, on the part of employee specially when department did not find anything wrong, when compared to employees of other CFS. Penalty set aside - appeal allowed.

Summary

Issues Involved:
1. Mis-declaration and smuggling of goods.
2. Compliance with Handling of Cargo in Customs Area Regulations (HCCAR), 2009.
3. Imposition of penalty on the appellant.

Summary:

The present appeal concerns the appellant, a Container Freight Station (CFS) operator, who was penalized for alleged violations of customs regulations. The issues involved include the mis-declaration and smuggling of goods, compliance with Handling of Cargo in Customs Area Regulations (HCCAR), 2009, and the imposition of a penalty on the appellant.

Mis-declaration and Smuggling of Goods:

On the basis of intelligence gathered by the Special Intelligence and Investigation Branch (SIIB), it was discovered that two containers stuffed with cosmetics were mis-declared as baby diapers and removed clandestinely from Ashutosh CFS, Mundra. The investigation revealed that the containers were imported in the name of two companies and that the documents used for clearance, including Bills of Entry, were found to be bogus. Detailed examinations confirmed the mis-declaration, and the goods were seized under Section 110 of the Customs Act, 1962, as they were liable for confiscation under Section 111(e), (f), (i) of the Customs Act, 1962.

Compliance with HCCAR, 2009:

The investigation highlighted that the staff of Ashutosh CFS failed to follow the prescribed procedure as per Public Notice No. 24/2007 and HCCAR, 2009. Despite noticing discrepancies in the documents, the staff allowed the clearance of goods, resulting in significant revenue loss. It was found that similar clearances had occurred on 14 previous occasions. The Principal Commissioner of Customs placed the appointment of Ashutosh CFS under suspension, which was later revoked. However, the Deputy Commissioner reported gross negligence on the part of the CFS staff.

Imposition of Penalty:

The Show Cause Notice issued under Regulation 6 of HCCAR, 2009, led to the imposition of a penalty of Rs. 50,000 on the appellant. The Commissioner (Appeals) upheld the penalty, stating that the CFS failed to adhere to the conditions prescribed in Regulation 6(1) of HCCAR, 2009. The appellant argued that the requirement of verification from ICEGATE came into existence only after the incident and that they had followed all requirements of the 2007 Public Notice. The appellant also cited a precedent where a similar case did not lead to penalties due to the lack of specific mention of the violated sub-clause of the regulation.

Tribunal's Decision:

The Tribunal found that there was no requirement in the 2007 Public Notice for employees to refer to ICEGATE prior to the 2015 Public Notice. The Tribunal also noted that the department had not issued penal or disciplinary notices to other CFSs involved in similar transactions. The Tribunal concluded that the imposition of the penalty on the appellant was not justified, as the additional condition imposed by the 2015 Public Notice was a procedural improvement. Therefore, the appeal was accepted, and the penalty of Rs. 50,000 was set aside with consequential relief.

The appeal was allowed, and the order was pronounced in the open court on 21.09.2023.