2018 (1) TMI 499 - AT - Customs

Penalty u/s 114 (1) and Section 117 of the CA, 1962 - smuggling - red saner logs - prohibited goods - Held that - the appellant has violated the provisions of Section 114 (1) of the Act as they omitted to take due care for transit of the declared cargo - taking note of the fact that there is no allegation of direct involvement of the appellants in the offence, the penalty of Rs. Two lakhs imposed is on the higher side and requires to be reduced - the penalty imposed on M/s. SEC Services Ltd., reduced to ₹ 50,000/-. Penalty on M/s. Bhavani Shipping Services (I) Pvt. Ltd., and M/s. Seaport Lines - allegation is that they did not obtain KYC details of the client - Held that - The Regulations require to obtain KYC of the client. M/s. Bhavani Shipping Services India Pvt. Ltd. is a shipping liner and they did not have any direct transaction with the exporter. Their immediate client was Ms/. Sea Port Lines (India) Pvt. Ltd. and they have produced the KYC details of M/s. Sea Port Lines (India) Pvt. Ltd. - In Scope Amra Logistics (I) Pvt. Ltd. Vs. CCE 2015 (6) TMI 652 - CESTAT MUMBAI it was held that in view of the role of the companies, the lapse is only confined to the non compliance of KYC and not involvement in the smuggling of Red Sanders. In view of this facts, I am of the view that the quantum of penalty on the Appellant companies are very higher side and the Appellant companies deserve reduction in the penalty imposed under Section 114(i) - penalties imposed on M/s. Bhavani Shipping Services (I) Pvt. Ltd. and M/s. Seaport Lines (I) Pvt. Ltd. set aside - the confiscation of the container in the present case is unjustified and requires to be set aside. Appeal allowed in part.

Summary

Issues Involved:
1. Legitimacy of penalties imposed under Section 114 (1) and Section 117 of the Customs Act, 1962.
2. Legitimacy of the confiscation of the container under Section 113 and 119 of the Customs Act, 1962.
3. Compliance with Regulations 6 (1) (k) of HCCAR, 2009.

Issue-wise Detailed Analysis:

1. Legitimacy of penalties imposed under Section 114 (1) and Section 117 of the Customs Act, 1962:
The appellants contested the penalties imposed under Section 114 (1) and Section 117 of the Customs Act. M/s. Bhavani Shipping Services (I) Pvt. Ltd. argued they were merely shipping liners who provided the container and had no direct involvement in the offense. They claimed compliance with KYC norms by submitting details of M/s. Seaport Lines (I) Pvt. Ltd., their immediate client. Similarly, M/s. Seaport Lines (I) Pvt. Ltd. contended they booked the container on a commission basis and verified the KYC details through their cargo transport service. The Tribunal found no direct transaction between the appellants and the exporter, thereby setting aside the penalties imposed on M/s. Bhavani Shipping Services (I) Pvt. Ltd. and M/s. Seaport Lines (I) Pvt. Ltd. However, the penalty on M/s. SEC Services Ltd. was upheld but reduced from ?2 lakhs to ?50,000 due to the absence of direct involvement in the offense.

2. Legitimacy of the confiscation of the container under Section 113 and 119 of the Customs Act, 1962:
The adjudicating authority had confiscated the container under Sections 113 and 119, imposing a redemption fine of ?2 lakhs. M/s. Bhavani Shipping Services (I) Pvt. Ltd. argued that the container does not fall under the category of goods liable for confiscation as per Section 113 and was not used to conceal smuggled goods under Section 119. The Tribunal referenced several precedents, including Freight Connection India Pvt. Ltd. Vs. CC (Exp.) and Skyline Shipping & Logistics Vs. CC, Chen., which supported the view that containers used for legitimate cargo cannot be confiscated. Consequently, the Tribunal set aside the confiscation of the container and the redemption fine.

3. Compliance with Regulations 6 (1) (k) of HCCAR, 2009:
The appellants were accused of violating Regulations 6 (1) (k) of HCCAR, 2009, by failing to obtain KYC details of the exporter. The Tribunal acknowledged that M/s. Bhavani Shipping Services (I) Pvt. Ltd. and M/s. Seaport Lines (I) Pvt. Ltd. had complied with KYC norms for their immediate clients, not the exporter. The Tribunal cited the case of Scope Amra Logistics (I) Pvt. Ltd. Vs. CCE, which emphasized the importance of KYC norms to prevent smuggling but also noted that penalties should be proportionate to the offense. The Tribunal concluded that the penalties on M/s. Bhavani Shipping Services (I) Pvt. Ltd. and M/s. Seaport Lines (I) Pvt. Ltd. were unjustified and set them aside, while reducing the penalty on M/s. SEC Services Ltd. to ?50,000.

Conclusion:
The Tribunal modified the impugned order by setting aside the penalties imposed on M/s. Bhavani Shipping Services (I) Pvt. Ltd. and M/s. Seaport Lines (I) Pvt. Ltd., as well as the confiscation of the container and the redemption fine. The penalty on M/s. SEC Services Ltd. was reduced to ?50,000. All three appeals were disposed of accordingly.

(Order pronounced in the open Court on 04.01.2018)