2015 (6) TMI 947 - AT - Customs

Confiscation of goods - Penalty u/s 114 - Misdeclaration of goods - Smuggling of red sanders logs - Held that - present appellant have issued the container in question for past export through another freight forwarder. I further find that the whole case of the Revenue is based on assumption and presumption as neither the main accused or the exporter/owners of the goods have been found and brought to adjudication and in the absence of examination of the main exporter and further in absence of the purported prohibited goods not found and or confiscated, I hold that no case is made out for imposition of penalty against the appellant. Accordingly, the impugned order with extent to imposition of penalty on the present appellant is set aside. - Decided in favour of assessee.

Issues Involved:
1. Legality of the penalty imposed under Sections 114(i), 114(iii), and 117 of the Customs Act, 1962.
2. Verification of credentials by the freight forwarder.
3. Assumptions and presumptions in the absence of main accused and confiscated goods.
4. Requirement of mens rea for imposition of penalty under the Customs Act.
5. Applicability of precedent judgments in similar cases.

Detailed Analysis:

1. Legality of the Penalty Imposed:
The appellant, M/s Freight Connection India Pvt. Ltd., appealed against the order of the Commissioner of Customs (Appeals) which imposed a penalty of Rs. 5 lakhs under Sections 114(i), 114(iii), and 117 of the Customs Act, 1962. The penalty was based on the allegation that the appellant failed to take precautions to prevent the misuse of containers and seals for smuggling prohibited goods, thereby abetting the actual exporters.

2. Verification of Credentials by the Freight Forwarder:
The appellant argued that the container was issued through another freight forwarder, M/s Welgrow, and it was Welgrow's obligation to verify the credentials of their clients. The appellant claimed that it is standard practice to verify the existence of the party when the order comes through another freight forwarder.

3. Assumptions and Presumptions:
The appellant contended that the entire case was based on assumptions and presumptions as the main accused or the exporters were not found or apprehended, and the goods relating to past export were neither found nor confiscated. The appellant relied on the ruling in Mithran Vs. Commissioner of Customs, Coimbatore, where the Tribunal held that penalty imposed on co-noticees based on assumptions and without determining the main offence was premature.

4. Requirement of Mens Rea for Imposition of Penalty:
The learned DR argued that mens rea is not required for the imposition of penalty under Section 114 of the Customs Act, citing the ruling of the Madras High Court in Commissioner of Customs Vs. Bansal Industries, which relied on the Apex Court's decision in Chairman, SEBI vs. Shriram Mutual Fund. The High Court held that mens rea is not necessary for imposing punishment under the Customs Act.

5. Applicability of Precedent Judgments:
The Tribunal, considering the facts on record, found that the case against the appellant was based on assumptions and presumptions. The main accused or the exporters were not brought to adjudication, and the purported prohibited goods were not found or confiscated. The Tribunal referred to the precedent set in Mithran Vs. Commissioner of Customs, Coimbatore, and held that no case was made out for imposing a penalty on the appellant.

Conclusion:
The Tribunal set aside the impugned order to the extent of the penalty imposed on the appellant, allowing the appeal and entitling the appellant to consequential relief in accordance with the law. The judgment emphasized that penalties based on assumptions and without concrete evidence against the main accused or confiscated goods cannot be sustained.

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