2002 (9) TMI 172 - AT - Customs

Summary

Issues Involved:
1. Confiscation of explosive material
2. Confiscation of remaining scrap
3. Imposition of penalties on Mukand Ltd. and its employees
4. Imposition of penalties on ITC Global Holdings and its employees
5. Imposition of penalties on Express Transport Ltd. and its employees

Detailed Analysis:

1. Confiscation of Explosive Material:
The confiscation ordered by the Commissioner of the explosive material is not challenged by anyone and therefore is confirmed.

2. Confiscation of Remaining Scrap:
The confiscation of the remaining scrap was challenged by Mukand Ltd. The Commissioner ordered the confiscation under Sections 118 and 119 of the Customs Act. Section 119 requires conscious intention for the concealment of smuggled goods. The Commissioner found no deliberate attempt to contravene any provisions of the law, thus no attempt to conceal the goods. The scrap was brought in containers, and the explosive material was found only after the scrap was piled into heaps, making it difficult to say that each container contained explosive material. The quantum of explosive substance was a small percentage of the total scrap, and the absence of intention to bring the explosive material was noted by the Commissioner. Therefore, the scrap was not liable to confiscation under Section 118.

3. Imposition of Penalties on Mukand Ltd. and its Employees:
Mukand Ltd. contended that it had taken sufficient precautions by insisting on inspection of the goods by Lloyds before shipment. The Commissioner found that the survey was conducted by buyer's surveyors appointed by Lloyds, not Lloyds directly. He speculated whether this departure was with the buyer's concurrence and noted that Mukand Ltd. should have known about the potential presence of explosives in Middle Eastern scrap. However, the Commissioner did not specify what additional precautions Mukand Ltd. could have taken. The Commissioner repeatedly acknowledged the absence of motive and did not establish what Mukand Ltd. did that would render its employees liable to penalty. Therefore, Mukand Ltd. and its employees were not found liable for penalty.

4. Imposition of Penalties on ITC Global Holdings and its Employees:
The show cause notice stated that ITC Global Holdings and its employees failed to comply with the inspection clause of the sales contract. ITC contended that it relied on an agent at Aden for inspection. The Commissioner found no collusion between the parties to import ammunition/explosives. The inspection clause did not specifically state that ITC's representative must be present during the survey. The Commissioner's argument that ITC's representative should have been present was not supported by the contract. The Commissioner also noted that the show cause notice did not charge the dangerous nature of the goods. The absence of specific allegations in the show cause notice meant that the adjudicating authority could not find the appellants in violation of Section 46 of the Act. Therefore, ITC Global Holdings and its employees were not liable for penalty.

5. Imposition of Penalties on Express Transport Ltd. and its Employees:
The show cause notice stated that Express Transport Ltd. and its employees failed to ensure proper examination of the containers and charged more than the prescribed amount for clearance. The Commissioner imposed penalties for facilitating the clearance of containers without proper examination. However, the show cause notice did not mention the need for proper examination. The Commissioner's finding that the failure to examine the goods properly was due to collusion between the custom house agent and the customer was not supported by the show cause notice. There was no proposal to impose penalties on the officers involved. For penalties to be imposed under Clause (b) of Section 112, it must be shown that the custom house agent had knowledge or reason to believe that the goods were liable to confiscation, which was not attempted in the show cause notice. Therefore, penalties on the custom house agent and its employees were set aside.

Conclusion:
The appeals were allowed, and penalties imposed on Mukand Ltd., ITC Global Holdings, Express Transport Ltd., and their employees were set aside. The confiscation of the explosive material was confirmed, but the confiscation of the remaining scrap was not upheld.