2014 (4) TMI 381 - AT - Customs

Removal of warehoused good based on photo copy of the duty paying Bill of Entry - Responsibility of Storage terminal - Defrauding of Customs Duty to the exchequer - Levy of Penalty / Personal Penalty u/s 112 and u/s 117 - Held that - action of the importers or their employees in paying an amount for which was shown by the individuals who master minded the entire fraud, can at the most be an act of erroneous business diligence, on their part. In my view, such an action is not covered under the provisions of Section 112 (a) of the Customs Act 1962 in as much as the importers or their employees never could have had a doubt that their goods are liable for confiscation, as the said goods were removed on BOE on which there was payment of duty. In any case, importers having discharged the customs duty and the interest thereof on all the goods imported by them, the question of visiting them with penalty does not arise. In the case in hand, the importer cannot be charged with the commission of omission which made the goods liable from confiscation. Penalties imposed on the CHA and the proprietors of CHA, I find that the Adjudicating Authority has specifically recorded that one Shri Malleshwar Rao is the master mind of the entire fraud committed on the Revenue. There is nothing on record which indicates that the CHA or power of attorney holder or the proprietor of CHA were aware the actions of the individuals who committed the fraud. It is on record that Shri Malleshwar Rao committed the fraud for his personal gain. In my view penalty imposed on the appellant who are CHS or Power of Attorney holders or authorised signatories or proprietors does not arise, hence that portion of the order is unsustainable and is being set aside. Storage terminal have not put in place the correct system for clearance of warehouse goods, in as much as they have allowed clearance of warehoused goods based on photo copy of the duty paying Bill of Entry which is not in accordance with the rules and regulations. To that extent the storage terminals have contravened the provisions of the Customs Act 1962 and the Rules made there under. In my view Storage Terminals having not put in place the correct system due to which warehoused goods were cleared on photocopy of B.O.E; have contravened the provisions of customs Act, for which a penalty can be imposed on them under the provisions of Sec 117 of the Customs Act 1962. Invoking the said provisions, I hold that the warehouse storage terminals need to be visited with a penalty of an amount of ₹ 1 lac each under the provisions of Section 117 of Customs Act 1962 and the Rules made there under - Decided partly in favour of appellant.

Summary

Issues involved:
1. Liability of importers for penalty under Sec. 112(a) of the Customs Act 1962 due to defrauding of Customs Duty.
2. Liability of storage terminals and their employees for penalty under Sec. 112(a) for allowing clearance based on forged documents.
3. Liability of CHA employees for penalty under Sec. 112(a) for lack of control over defrauders.
4. Individual liability of a person for forging documents.

Analysis:

1. Liability of Importers:
The judgment addressed the penalty imposition on importers under Sec. 112(a) of the Customs Act 1962. The Adjudicating Authority held importers liable for purchasing demand drafts from unknown individuals, leading to the confiscation of goods. However, the Tribunal found that importers had paid customs duty and interest, showing diligence. Citing precedents, the Tribunal concluded that importers could not be penalized for actions beyond their knowledge, setting aside the penalties.

2. Liability of Storage Terminals:
Regarding storage terminals, penalties were imposed for allowing clearance based on forged documents. The Tribunal observed that storage terminals acted in good faith, unaware of the fraud committed by individuals. The penalties on storage terminals were set aside, but they were held accountable for contravening customs regulations by allowing clearance based on photocopies, leading to penalty under Sec. 117.

3. Liability of CHA Employees:
The judgment discussed penalties imposed on CHA employees for lack of control over defrauders. The Tribunal noted that the mastermind behind the fraud was identified as an individual, absolving CHA employees of awareness. Consequently, penalties on CHA personnel were deemed unsustainable and set aside.

4. Individual Liability for Forgery:
The judgment addressed the individual liability of a person for forging documents, specifically mentioning the case of Shri Jayesh. The Tribunal upheld the penalty on Shri Jayesh for forging a customs appraiser's signature, as admitted by him, under Sec. 112(a) of the Customs Act 1962.

In conclusion, the Tribunal set aside penalties on importers and CHA personnel due to lack of awareness or control over the fraudulent activities. Storage terminals were held accountable for procedural lapses but were not penalized for the fraud itself. Individual liability for forgery was upheld, emphasizing adherence to customs regulations and penalties for deliberate violations.