2013 (9) TMI 509 - AT - Customs

Penalty u/s 112 - Department issued a show-cause notice to assessee for fraudulent import of sodium sulphate Held that - The action was unsustainable in law order for imposing penalty set aside - from the records no bill of entry had been filed - any charge of violating the provisions of Customs Act would arise only when somebody files a bill of entry for import of the goods and claims himself to be the importer - violating the provisions of Section 111 (m) would not arise at all - the appellant did not had any IEC code at the time of importation - lending of IEC code to anyone else also would not arise there could not be any violation of Rules 7 & 11 of the Foreign Trade (Regulations) Rules attracting the provisions of Section 111 (d) no penalty could be imposed decided in favour of assessee.

Summary

Issues:
Fraudulent import of sodium sulphate, misuse of IEC code, imposition of penalty without cause of action.

Analysis:
The case involved an appeal against an order passed by the Commissioner of Customs (Appeals) regarding fraudulent import of sodium sulphate by M/s. Chemworld Inc., Ahmedabad. The appellant was implicated as the consignee based on received documents, even though they denied importing the goods and informed the foreign supplier accordingly. The appellant was accused of lending their IEC code to someone else, leading to the imposition of a penalty of Rs.6 lakhs. The appellant argued that they did not possess an IEC code at the time of importation, thus refuting the allegations of misusing the code. The Revenue contended that the appellant initially consented to import the goods but later canceled the transaction, emphasizing the absence of an IEC code during importation.

Upon careful consideration, the Tribunal found the situation peculiar as no bill of entry was filed, and the appellant did not claim to be the importer, negating any violation of Customs Act provisions. Additionally, since the appellant did not possess an IEC code during importation, the accusation of lending it to someone else was baseless. Consequently, the Tribunal concluded that the Customs authorities' actions and the penalty imposition were legally unsustainable. The impugned order penalizing the appellant was set aside, and the appeal was allowed, with the stay application disposed of. The Tribunal directed the Chief Commissioner of Customs, Mumbai, to issue necessary instructions to prevent similar instances in the future, emphasizing the importance of avoiding unjust penalties without a valid cause of action.

In summary, the judgment highlighted the importance of establishing a cause of action before imposing penalties under the Customs Act. It emphasized the necessity of filing a bill of entry and claiming importation to trigger violations, ultimately leading to penalties. The case underscored the significance of adhering to legal provisions and ensuring that penalties are imposed only when a valid legal basis exists, preventing unjust actions by Customs authorities.