2014 (10) TMI 507 - AT - Customs

Violation of provisions of Sections 40 & 51 - Penalty u/s 114 - On recording the findings that the goods have been loaded and the ship which sailed before the issuing of the LEO and hence, the goods were liable to confiscation under the provisions of Section 13(g) and accordingly liable to penalty under Section 114(iii) of the Act. The goods were held liable to confiscation. - Held that - Shipping bills were presented under the EDP system almost two days prior and further the goods were stuffed under the supervision of Excise/Customs authorities in the factory. In the present case as per the endorsement, the goods were loaded on the ship under the supervision of the Customs authorities at port. In view of the fact that exporter did not have any control over loading of container on the vessel, I find it is a fit case that no penalty should be levied for the alleged violation - Decided in favour of assessee.

Issues: Alleged violation of provisions of Sections 40 & 51 leading to penalty imposition, Time-barred show cause notice, Liability of exporter for goods loaded without LEO, Applicability of penalty under Section 114(iii) of the Act.

Alleged Violation of Provisions of Sections 40 & 51 and Penalty Imposition:
The appellant, a tyre manufacturer exporting goods, faced a show cause notice alleging violations of Sections 40 & 51. The goods were loaded on a vessel before the issuance of the LEO, leading to the imposition of a penalty under Section 114(iii) of the Act. The Commissioner (Appeals) reduced the penalty, but the appellant remained aggrieved and approached the Tribunal. The appellant argued that the show cause notice was time-barred, emphasizing the lack of incentive for mischief due to factory stuffing under excise supervision and the involvement of a Customs House Agent (CHA) responsible for clearance. Citing precedents, the appellant contended that circumstances beyond their control absolved them of liability under Section 50(1) of the Customs Act, seeking the penalty's setting aside.

Time-barred Show Cause Notice and Procedural Lapse Defenses:
The appellant's counsel raised the issue of the show cause notice being issued nearly 3.5 years after the incident, asserting procedural impropriety and time-barred proceedings. Arguing that the goods were stuffed under official supervision and the CHA managed clearance, the appellant contended that no procedural lapse occurred on their part. Relying on legal precedents, the appellant highlighted instances where external factors, such as holidays affecting customs procedures, absolved exporters of liability, emphasizing the lack of control over vessel loading as a mitigating factor against penalty imposition.

Liability of Exporter for Goods Loaded Without LEO:
The Deputy Commissioner supported the lower court's decision and emphasized the exporter's responsibility for goods loaded onto vessels, asserting that the exporter's duty is only complete upon receiving the LEO from Customs. Citing legal precedents like the Nichrome India Ltd. case, the Deputy Commissioner argued that sailing before obtaining the LEO does not absolve the exporter or the CHA from liability, maintaining that penalties are warranted in such cases.

Applicability of Penalty under Section 114(iii) of the Act:
In the final judgment, the Tribunal considered the submissions of both parties. Noting the presentation of shipping bills under the EDP system and the stuffing of goods under official supervision, the Tribunal found that the exporter had no control over the loading process onto the vessel. Given these circumstances, the Tribunal concluded that no penalty should be levied for the alleged violation. Consequently, the Tribunal allowed the appeal and set aside the penalty imposed on the appellant, emphasizing the lack of control over the loading process as a key factor in their decision.

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