2024 (6) TMI 591 - AT - Customs

Imposition of penalty on CHA / Co-noticee u/s 114 (iii) of the Customs Act 1962 - Misusing the drawback benefit by fraudulent exports. There is no allegation in the SCN or in the OIO that the appellant had directly involved in the illegal activities. It is submitted that in a case filed by M/s. Skylark Cargo Services, who is a co-noticee in the proceedings arising out of the very same show cause notice, the Tribunal had considered the issue of imposing penalty on the CHA under Section 114 (iii) of Customs Act 1962. HELD THAT - The Ld. Counsel has brought to notice that the Tribunal in the case of CHA who was a co-noticee in the proceedings has considered the issue in detail and reduced the penalty from Rs.3,00,000/- to Rs.75,000/-. In the said decision the Tribunal observed that there is no allegation that the appellant themselves have benefited from any part of the drawback fraudulently obtained by the main operators/exporters. The penalty requires to be reduced from Rs.3,00,000/- to Rs.75,000/-. The impugned order is modified to the extent of reducing the penalty imposed on this appellant from Rs.3,00,000/- to Rs.75,000/-. The appeal is partly allowed.

Summary

Issues: Imposition of penalty under Section 114 (iii) of the Customs Act 1962 on a Customs House Agent (CHA) for facilitating fraudulent exports to obtain higher drawback benefits.

Analysis:

1. Factual Background: Customs officers intercepted two export consignments suspected of misusing drawback benefits through fraudulent exports. The consignments contained junk and unusable shoe uppers instead of the declared leather shoe uppers, leading to the issuance of show cause notices proposing duty demand and penalties.

2. Imposition of Penalty: The original authority imposed a penalty of Rs.3,00,000 on the CHA under Section 114 (iii) of the Customs Act 1962 for facilitating the fraudulent activities related to the misdeclaration of goods and obtaining higher drawback amounts.

3. Appellant's Argument: The CHA argued that there were no direct allegations of involvement in the fraudulent activities, citing a previous Tribunal decision where penalties on CHAs were reduced due to lack of direct benefit from the fraudulent activities. The appellant sought a reduction in the penalty amount based on this argument.

4. Department's Response: The authorized representative for the department reiterated the findings in the impugned order, supporting the imposition of the penalty as per the original authority's decision.

5. Tribunal's Decision: After hearing both sides, the Tribunal considered the issue of penalty imposition under Section 114 (iii) of the Customs Act 1962. Referring to a previous case, the Tribunal found that while the appellant could not escape penalties, there was no evidence of direct benefit from the fraudulent activities. Consequently, the Tribunal decided to reduce the penalty from Rs.3,00,000 to Rs.75,000, following the precedent set in the earlier case.

6. Conclusion: The Tribunal modified the impugned order, reducing the penalty imposed on the appellant CHA from Rs.3,00,000 to Rs.75,000. The appeal was partly allowed in favor of the appellant, providing consequential relief as necessary.