2017 (4) TMI 583 - HC - Customs

Imposition of penalty u/s 114 of CA, 1962 - Export of prohibited items - Liability of Customer Freight Station (CFS) and a custodian of goods - goods originally packed in the container, natural granite chips, were substituted clandestinely and without the knowledge of the appellant at the time of transportation to the port for export - According to the appellant, transportation was the domain of custom house agent and not the custodian - Whether there is scope for imposing penalty u/s 114 of CA 1962 in the absence of any knowledge on the part of the appellant of the offence alleged to have been committed by the exporter? Held that - Increasing clarity has been brought in with regard to the role and responsibility fastened upon the custodian with the evolution of the guidelines from 1993 to 1998. It is made incumbent on the CFS/custodian to assume responsibility, not merely for duty liability on loss/pilferage of goods under transportation, but for the goods itself - The very fact that a custodian is to be held responsible for loss of the goods means that the ultimate responsibility in relation to the contents of the container lies with it. This will include loss of the original goods by substitution which has happened under the watch of the CFS. The custodian is, but one link in the chain of events relating to the movement of goods in the course of import and export. Accepting the argument of the appellant would weaken one link of the chain, thus compromising the entire network. The provisions of section 114 will stand automatically attracted in the event of violations by way of omission and commission of the acts - appeal dismissed - decided against assessee.

Issues Involved:
1. Imposition of penalty under Section 114 of the Customs Act.
2. Responsibilities of a Container Freight Station (CFS) custodian.
3. Applicability of mens rea (criminal intent) in civil law contraventions.
4. Interpretation and application of guidelines issued by the Central Board of Excise and Customs.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 114 of the Customs Act:
The appellant challenged the imposition of a penalty under Section 114 of the Customs Act by the Customs Excise and Service Tax Appellate Tribunal (CESTAT), which confirmed the penalty but reduced the quantum from ?5 lakhs to ?2.5 lakhs. The appellant contended that there was no knowledge or involvement in the offense committed by the exporter, arguing that the goods were substituted clandestinely without their knowledge during transportation to the port for export.

2. Responsibilities of a Container Freight Station (CFS) Custodian:
The appellant, as a CFS custodian, was responsible for the receipt, storage, and movement of cargo as per Section 45 of the Customs Act. The guidelines issued by the Central Board of Excise and Customs, particularly Circular No. 128/1995 and Circular No. 57/1998, outlined the extensive responsibilities of custodians, including the provision of safe storage, insurance, execution of bonds, and liability for goods lost during transshipment. The court emphasized that the custodian's responsibility extended from the time of storage until the goods arrived at the gateway port or other customs areas and were cleared for export.

3. Applicability of Mens Rea in Civil Law Contraventions:
The appellant argued that mens rea (criminal intent) was necessary to attract the provisions of Section 114. However, the court, relying on precedents such as Chairman, SEBI vs. Shriram Mutual Fund and Pine Chemicals Suppliers vs. Collector of Customs, held that mens rea is not an essential ingredient to establish contravention of a civil law. The Tribunal's decision was based on the principle that a custodian's responsibilities are clear and do not require proof of intent for penalties to be imposed.

4. Interpretation and Application of Guidelines Issued by the Central Board of Excise and Customs:
The court analyzed the guidelines from Circular No. 128/1995 and Circular No. 57/1998, which detailed the custodian's responsibilities, including accountability for goods during transit. The guidelines made it clear that the custodian was responsible for any shortages or discrepancies during transportation. The court noted that the appellant's role as a custodian involved full custody of the goods from storage to clearance at the gateway port, and any attempt to dilute this responsibility would compromise the entire network of import and export processes.

Conclusion:
The court dismissed the appeal, holding that the custodian's responsibilities were comprehensive and included liability for the goods during transit. The substantial question of law was answered against the assessee and in favor of the Revenue, affirming the imposition of the penalty under Section 114 of the Customs Act. The court emphasized that the custodian's role is dynamic and integral to the entire chain of events in import and export transactions, and any violation, whether by omission or commission, would attract the provisions of Section 114.

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