2017 (3) TMI 444 - AT - Customs

Imposition of penalties u/s 112 (a) and (b) of CA, 1962 - Held that - Section 112 of CA, 1962 is liable to be invoked only for acts of omission and commission in relation to goods that are liable to confiscation. It is not an independent provision in accordance with which penalty may be imposed on individuals. In the absence of a finding on liability of goods for confiscation, section 112 cannot be invoked - When the jurisdiction to confiscate was alienated, and not resorted to by the adjudicating authority, the noticees were not heard on the confiscability of the goods. In the absence of such an opportunity, there was no scope for rendering a finding on liability for confiscation. The adjudicating authority rightly desisted from invoking the jurisdiction to confiscate. However, that also eliminated the jurisdiction to invoke section 112 of Customs Act, 1962. Consequently, the imposition of penalties on the appellants is without sanction of law - appeal allowed - decided in favor of appellant.

Summary

Issues:
Imposition of penalty under section 112 of Customs Act, 1962 on two individuals for their alleged role in clearing imported textiles, applicability of settlement in favor of main noticee on co-noticees, lack of findings on confiscability of goods and contribution of appellants to offenses, invocation of section 112 without liability for confiscation, jurisdiction of adjudicating authority, reliance on legal precedents.

The judgment by the Appellate Tribunal CESTAT MUMBAI pertains to the imposition of penalties under section 112 of the Customs Act, 1962 on two individuals for their involvement in clearing imported textiles. The appellants were penalized for declaring cargo incorrectly to pay lower duty rates. The adjudicating authority found that the consignments had been cleared by one individual operating under a different entity's license. The proceedings were later limited to the two appellants after the importer settled with the Customs & Central Excise Settlement Commission. The appellants challenged the lack of clarity in the show cause notice and the absence of findings on the goods' confiscability. They argued that section 112 cannot be invoked without establishing liability for confiscation. The tribunal noted that the penalties were imposed without proper legal basis as the adjudicating authority failed to determine the confiscability of the goods, a prerequisite for invoking section 112.

The tribunal emphasized that section 112 of the Customs Act, 1962 is applicable only when there are acts leading to confiscation of goods. Since the adjudicating authority did not establish the goods' liability for confiscation, invoking section 112 was deemed inappropriate. The judgment highlighted the importance of natural justice in adjudication, stating that noticees must have the opportunity to defend themselves, especially on matters related to confiscation. As the jurisdiction to confiscate goods was not exercised by the adjudicating authority, the penalties imposed on the appellants lacked legal sanction. The tribunal also noted that various legal precedents supported the principle that settlement with the main noticee affects co-noticees, leading to the allowance of the appeals and setting aside of the impugned order.

In conclusion, the judgment by the Appellate Tribunal CESTAT MUMBAI addressed issues related to the imposition of penalties under the Customs Act, 1962, the necessity of establishing liability for confiscation before invoking section 112, and the impact of settlements on co-noticees. The decision underscored the importance of due process and legal clarity in adjudication, ultimately leading to the setting aside of the penalties imposed on the appellants.