2023 (11) TMI 422 - AT - Customs

Levy of penalty u/s 114 (i) and u/s 114 AA of FA - Smuggling - red sanders - replacement of the goods enroute with red sander - penalty imposed only on ground that the appellant have not informed the customs authorities, immediately about the stuffing of red sander in the container and informed only on the next day. HELD THAT - It is found that the appellant has given a statement that in the evening when he knew about the stuffing of red sander in the container he was in Mumbai and after returning from their next day itself he informed the customs authorities. The act of the appellant was not found malafide by the Learned Commissioner (Appeals) in his order. The learned Commissioner (Appeals) accepting that the appellant did not have direct involvement in the illegal export of prohibited good red sander reduced the penalty substantially - once the Commissioner (Appeals) is of the view that the appellant have no direct involvement, the penalty even reduced cannot be upheld. In an appeal against the Commissioner (appeals) order this Tribunal set aside the penalty in KARAN BABUBHAI CHAUHAN VERSUS C.C. MUNDRA 2023 (5) TMI 1267 - CESTAT AHMEDABAD where it was held that I do not see any reason or role of the appellant to attract penalties under Section 114 (i) and Section 114 (AA). From the above decision it can be seen that identical facts and same allegation was made against the appellant in the above decision and the Tribunal has set aside the penalties - in the present case also the appellants being identically placed as appellant in the above decision the penalty are not sustainable. Hence, the same are set aside. Appeal allowed.

Summary

Issues involved:
The issues involved in this case are the imposition of penalties under Section 114 (i) and Section 114 AA on a custom broker and an employee for their alleged involvement in the smuggling of red sanders in place of wash basins in containers meant for export.

Details of the Judgment:

Issue 1: Alleged involvement in smuggling of red sanders
The Adjudicating Authority imposed penalties on the custom broker and the employee for not immediately informing the customs authorities about the replacement of wash basins with red sanders in the containers. The penalties were reduced by the Commissioner (Appeals) based on the argument that the appellants were unaware of the smuggling and took prompt action upon discovery. The Tribunal observed that the penalties were imposed solely on the grounds of delayed information to the authorities, which was not found to be malafide. The Commissioner (Appeals) acknowledged that the appellants had no direct involvement in the illegal export of red sanders, leading to a substantial reduction in penalties. The Tribunal, citing a similar case, set aside the penalties as the appellants were unaware of the smuggling and had no ulterior motive or knowledge to warrant penalties.

Issue 2: Compliance with customs regulations
The appellants contended that they were appointed as Custom House Agents (CHA) by the exporter and were not aware of the replacement of goods enroute. They argued that they promptly informed the authorities upon discovering the red sanders in the containers. The Commissioner (Appeals) noted that the appellants had fulfilled their due diligence obligations by obtaining necessary export documents and KYC details from the exporter. The Tribunal, based on the findings in a previous case, concluded that the appellants had no knowledge or involvement in the smuggling and therefore set aside the penalties imposed under Section 114 (i) and Section 114 AA.

Conclusion:
The Tribunal found that the penalties imposed on the custom broker and employee were not sustainable as they were unaware of the smuggling of red sanders and promptly informed the authorities upon discovery. The penalties were set aside, and the appeals were allowed.

*( Pronounced in the open court on 03. 11. 2023 )*