2014 (8) TMI 810 - AT - Customs

Penalty on the appellant who was attending to the day-to-day clearance work of the CHA and was authorised by a Power of Attorney for clearance of goods Exemption of Duty diversion of the imported goods - argument that an employee working upon the instruction of the employers cannot be visited with a penalty - Held that - Shri Dev Kumar Kapta was authorised by the importers and field bills of entry in self on behalf of the importers. He not only filed and cleared the imported goods on behalf of the importers knowing fully well the nature of imports but also fabricated the bills of entry used for diverting the goods meant for free distribution to earthquake victims in Gujarat to places outside Gujarat. Appellant has not merely acted as a paid employee of M/s Kandla Clearing Agency but as an active participant in the act of diverting imported goods meant for free distribution under exemption Notification No. 7/2001-cus. The duty free clearance of goods under this exemption notification was subject to condition (i), (ii), and (iii) of the Notification. As these conditions have not been fulfilled the seized goods become liable to confiscation under Sec. 111(0) of Customs Act 1962, as proposed in the show cause notice dt 26/3/2002 and correctly confirmed by the adjudicating authority. As the appellant has played an active role in import and diversion of imported goods conditionally exempted under Notification No. 7/2001-cus hence penalty is correctly imposable upon the appellant under Sec. 112 of the Customs Act 1962. However, looking to the value of confiscated goods (Rs 49.25 lacs and RS 15.26 lacs), and what could have been the intended benefits out of such diversion, it is felt that penalty of ₹ 25 lakh imposed by the Adjudicating authority is excessive. In the interest of justice, we reduce the penalty imposed upon the appellant from ₹ 25 lacs to ₹ 5 lacs under Se. 112 of the customs Act 1962 - Decided partly in favour of appellant.

Summary

Issues:
Imposition of penalty under Section 112(b) of the Customs Act 1962 on the respondent.

Detailed Analysis:

Issue 1: Imposition of Penalty

The appeal was listed based on the Gujarat High Court's order in Tax Appeal No. 624 of 2010 regarding the penalty of Rs. 25 lakhs imposed under Section 112(b) of the Customs Act 1962. The High Court remanded the matter to the Customs, Excise and Service Appellate Tribunal, Ahmedabad, directing a fresh decision with proper reasoning. The Tribunal was instructed to pass a reasoned order. The High Court found the Tribunal erred in its decision, leading to the appeal.

Issue 2: Background and Facts

The case involved the appellant, who was a paid employee of a Clearing House Agent (CHA) and was authorized to clear goods for a charitable trust. The imported goods were meant for earthquake victims in Gujarat under a customs duty exemption. However, investigations revealed misuses of this exemption, leading to a penalty of Rs. 25 lakhs imposed on the appellant. The appellant argued that he acted under the instructions of his superiors and should not be penalized for post-importation activities.

Issue 3: Arguments and Defense

The appellant's counsel argued that the penalty was excessive and cited case laws to support the argument that employees following employer instructions should not be penalized. The Revenue's representative countered, stating the appellant played an active role in diverting goods and was aware of the misrepresentation in the documents. The Revenue defended the penalty imposition.

Issue 4: Tribunal's Decision

After hearing both sides and reviewing the case records, the Tribunal considered the appellant's role in the diversion of imported goods. The statements and actions of the appellant indicated active involvement in misrepresenting documents and diverting goods meant for charity. The Tribunal found the penalty justified but deemed the original amount excessive. In the interest of justice, the penalty was reduced from Rs. 25 lakhs to Rs. 5 lakhs under Section 112 of the Customs Act 1962.

Conclusion

The Tribunal allowed the appeal to the extent of reducing the penalty imposed on the appellant. The decision was pronounced on August 21, 2014, based on the detailed analysis of the appellant's involvement in the diversion of imported goods and the appropriate penalty under the Customs Act 1962.

This comprehensive analysis covers the background, arguments, defense, Tribunal's decision, and the final conclusion of the judgment regarding the imposition of the penalty under the Customs Act 1962.